U.S. pay at the table restaurants continue to refuse to comply with EMV, primarily because of the lack of perceived EMV risks related to restaurant chargebacks and terminal cost. One of the key concepts of EMV was that the customer would never let the payment card out of sight (to copy the PAN and four-digit identifier). Today when you dine at a Canadian or European pay at the table restaurant, the waiter brings an EMV compliant Wi-Fi terminal to the table and sets it in front of the customer. The customer reviews the total, adds a tip, and then pays with a chip card or NFC mobile wallet on the phone. Why won’t the U.S. restaurants comply? If EMV is not enough to convince U.S. pay at the table restaurants to invest in WI-FI terminals, might a solution that increases spend, frequency and profits be the tipping point?
Jeff Mankoff, founder and CEO of vPromos, discusses two ways that card-linked offers can be delivered, linked and redeemed: cloud card-linking and the second is terminal integrated card-linking. Each has very different ramifications for the retailer and customer; cloud card-linking is easy to implement and get started, while terminal integrated delivers a better merchant and customer experience.
Read the full article at: www.cardlinx.org
In my last post Part 1. It’s the Wine, not the Vessel that Matters; Why Mobile Wallets Failed, I explained that the mobile wallet players were playing the wrong game because:
- Credit cards work perfectly fine for payment; and
- Mobile wallets are just a novelty so long as customers have to ask if the store accepts mobile payments.
After further thought, the vessel does matter, especially if you have found the Holy Grail. In this vessel analogy, a merchant loyalty program is the wine that merchants offer, so their customers will:
- Give up personal information e.g. mobile number
- Be marketed to e.g. text message loyalty updates
- Be loyal and not shop competitors.
The Holy Grail is the vessel that will seamlessly and automatically make this happen.
While a Starbucks customer may download the Starbucks App, they are not downloading an App for smaller merchants.
Loyalty enrollment, tracking and engagement must be simple, seamless, and automatic, and that is what terminal integrated card-linking excels at.
Terminal integrated card-linked loyalty allows the customer to link her own payment card (credit or debit) already in her leather wallet, to the merchant’s loyalty program, so that every time payment is made, loyalty points are automatically earned and rewards automatically redeemed, at the terminal.
Terminal integrated card-linked loyalty allows the merchant to easily enroll its own customers in its own loyalty program, at the terminal, by linking the payment card with the customer’s mobile number. And there is no App or mobile wallet needed.
Terminal integrated card-linked loyalty makes it possible for small and large businesses to offer their customers the most advanced, automated and easy loyalty solution in the market place. And that is the Holy Grail.
Have you implemented the Holy Grail in your business?
On November 16, 2010, T-Mobile, Verizon, and AT&T formed ISIS (Softcard), in order to enter the mobile wallet space, initiating the mobile wallet war. Google had its wallet, banks were building their own, and many tier one merchants had no interest in paying or sharing their data with the mobile carriers or Google. Then ApplePay came along and everyone said ApplePay had figured it out and would win the war. The problem with mobile wallets is that the war was initially fought by firms trying to fix a problem that did not exist and not knowing what they were really fighting for, payment integrated marketing.
As of July 2016 all of the mobile wallets lost the war. After BILLIONS of dollars spent (Soft Card ~ $800MM, Google Wallet $1 billion+…) and little consumer or merchant adoption,
- Google Wallet initially stumbled because the carriers would not let Google Wallet get on their phones to compete with the carriers’ Softcard solution;
- Softcard failed and ended up selling its assets to Google;
- MCX laid off half its force (~40 people) and pivoted, letting much bigger and richer players battle for the consumer, and letting each retailer pursue its own wallet solution; and
- Apple has made little traction with consumers.
Why did mobile wallets fail? One reason is mobile wallets are not easy. Consumers have to:
- Set up a payment card in the mobile wallet;
- Learn a new behavior (pay with phone instead of card); and
- Make sure the merchant location accepts mobile payments
Right there, with those seemingly simple steps, the mobile wallet lost 99% of consumers. Mobile wallets failed because payments is NOT broken for consumers. Payments may be terrible for retailers because of the fees, but consumers are covered with their ubiquitous plastic that works everywhere and is easy to use.
But why were these battlers fighting with mobile wallets in the first place? These firms focused on the vessel, and not what was in the vessel. Payment integrated marketing, offers and loyalty tied to the customer’s payment method, is what matters. But payment integrated marketing will not work if only 1% of consumers have access to it. But there is a solution, and it exists today. The Holy Grail (vessel) capable of powering payment integrated marketing is the ubiquitous plastic that works everywhere and is easy to use; the customer’s own credit card.
Part 2. Why Card Linking is the Holy Grail.
Jordan Thaeler makes excellent points against the POS App store in his recent article, POS App Stores Don’t Work, So Shut Up.
While his article focuses on POS App stores, the terminal App store model is now being floated by leading terminal companies. Like the POS App store, a terminal App store is also a bad idea for the terminal company and its independent resellers (ISOs), primarily because of channel conflict and commoditization of the value added product (or App in this case).
Integrating with POS companies as Thaeler addresses was a huge challenge. There were just too many thousands of them and most did not have the bandwidth to work with third parties. But with EMV, many POS companies are getting out of payments, leaving a manageable number of terminal companies to partner with (especially for third party developers focused on payment linking).
ISOs today are looking for value added solutions like card-linked loyalty, because payments have been commoditized, resulting in 20% attrition and vastly reduced processing revenues. I applaud the terminal companies opening up of APIs to third-party firms to develop software on these terminals. They say it is coming just as soon as they free up resources from EMV. I boo the idea that the way to sell these third party value added solutions is direct to the merchant on some sort of Merchant Terminal App store, for all of Thaeler’s reasons and more.
When comparing the consumer Apple App store to a POS App store, Thaeler wisely observes: “The biggest distinction, however, is that businesses do not do self-discovery.” Is a terminal company expecting the merchant to go through a list of Apps and make a selection on its own? If the answer is yes, then that spells the end of the terminal company’s ISO channel. If ISOs are to exist, they need to add value and make money.
A low fidelity self help product like Square expect its merchants to figure out the Square product for itself. Copying Square’s self help model with a self help Terminal App store does not mesh with the current Terminal/ISO reseller relationship. Today, terminal companies leverage thousands of independent resellers to distribute its terminals to millions of SMBs. Terminals are more secure and can do more than a product like Square, and as a result require a human touch to sell, set-up, and support.
If these terminal companies allow merchants direct access to dozens of competing loyalty programs in an App store for example, isn’t that the definition of Channel Conflict? “Channel conflict occurs when manufacturers (brands) disintermediate their channel partners, such as distributors, retailers, dealers, and sales representatives, by selling their products directly to consumers through general marketing methods and/or over the Internet.” (If a Terminal App store self help model is to be used, then it should be entirely self help, like Square. You can’t have it both ways.) In addition, the numerosity of loyalty programs will result in a price war to the bottom. This channel conflict and commoditization will eliminate profits for ISOs, the third party developer, and the terminal company.
An ISO agent in effect is a consultant, expert in payments, and soon to be expert in card-linked loyalty and promotions. The ISOs, exclusively, should be able to pick and choose what terminal integrated value added products they want to resell. Only the ISOs should be able to peruse an App store, and pick the products it wants to sell and differentiate from its competition.
These Apps on a terminal are not going to sell themselves. Let the ISO excel at what it does in defining customized solutions for its customers and sell these value-added terminal integrated solutions to its own customers; its merchants.
What do you think? Leave a comment below.
As we discussed in my last post, there are three essential elements of loyalty; 1. Enrollment; 2 Engagement; and 3. Redemption. Today we discuss card linked enrollment for a merchant’s loyalty program.
There are two types of card linking loyalty options; terminal agnostic and terminal integration. Terminal agnostic is 100% in the cloud and does not touch the terminal. In fact that is a major benefit of terminal agnostic card linking. The card brands, MasterCard and Visa are offering to marketing platforms, card linking solutions that integrate with loyalty solutions, like the BP card linking loyalty solution recently rolled out. But there is one drawback with terminal agnostic card linking; enrollment is too hard.
Convincing a shopper to go online and provide a credit card number for a single merchant’s loyalty program is hard. While an advocate of a major brand like BP may go online and enroll, the average customer for an average merchant is not. It is just too hard.
Another terminal agnostic card linking enrollment option is to first ask the customer to download a mobile phone loyalty app for the merchant’s loyalty program, and then if the app is downloaded, second ask the customer to set up an account in the app, and third, enter their credit card for the loyalty program.
The problem here is that the average smart phone user already has 26.7 apps on the cluttered phone. Remember share of wallet? Now there is a share of mobile phone screen space. The app is probably not getting downloaded. The other issue is that 70% of the total usage is coming from the top 200 apps. (Nielson 06-11-2015) What are the chances the customer will take the time to download the loyalty app just to link the credit card to the merchant’s loyalty program? There is another way.
Terminal integrated card linking excels at enrollment, and here is why. When the customer pays with a payment card, a card linking platform like vPromos in real time can see if the payment card token is in the loyalty program. If not, a message like the one above is sent to the terminal, prompting the customer to provide a secondary unique loyalty identifier like a mobile number.
Before EMV, trying to integrate card linking with point of sale systems was hard. There were just too many POS systems to integrate with. And POS systems were notoriously unwilling to make it easy to integrate because of PCI requirements.
After EMV, the payments landscape is changing. Now most POS companies are no longer processing credit cards. That responsibility of credit card processing is left to the terminal companies. There are just a handful of terminal companies, and these companies are entering the card linking space. For example, Verifone, the terminal leader in the US, is taking the lead in the terminal space with its Card Commerce initiative which will enable terminal integrated card linking. Terminal integrated card linking is about to take off in 2016.
What are your thoughts about how to take advantage of terminal integrated card linking?
A loyalty program delivered smartly will attract new customers, turn customers into repeat customers, increase business, and deliver valuable business data and demographic intelligence. While the world today expects elegant solutions achieved through technology and automation, it’s clear that most of today’s loyalty solutions, are still reliant on manual execution. As a result, the loyalty process interrupts the payment process and is often prone to delivering a poor experience for both the customer and merchant.
We can do better. It is time for loyalty programs to enter the twenty first century and become automated. A merchant loyalty program linked to the customer’s payment card offers all parties an easy, seamless, automated, reliable and accurate loyalty solution.
There are typically three basic challenges with loyalty programs that every CMO wants to improve:
- Enrollment – Cashiers don’t always ask customers to enroll, and customers don’t always want to supply personal information to a stranger.
- Tracking – Again, the problem is that cashiers are not always asking for loyalty numbers or cards associated with loyalty.
- Redemption – Customers are not redeeming rewards as expected. They say it is too hard to download rewards and remember to bring to the store.
The reality is that everyone, including your loyal customers want convenience in their busy lives. One company, British Petroleum (BP), is making it easy for their loyal customers to earn points and rewards.
BP just introduced its card linking loyalty solution at the gas pump. Historically, customers had to swipe their loyalty card or enter a 10 digit number. BP customers can now go online and link their payment card to the BP loyalty card.
After linking the credit card, a BP customer earns points every time they pay. No additional steps to take. To redeem the rewards, the BP customer simply pays, and the reward comes off on their linked credit card statement. Today this only works with Visa, but it is still a huge convenience for BP customers.
Retailers need to make it easier for customers to enroll, track and redeem rewards. That means in addition to letting customers earn and redeem points by showing their loyalty card or providing their mobile number at checkout, we should let our customers earn and redeem rewards with their existing credit or debit card.
Loyalty Program Background and Challenges
Today, a loyalty tracking system is typically manual. This means every time a customer pays, the cashier must ask: “Are you in our reward program?”
This question must be asked every time because a manual loyalty tracking system has no way of knowing whether the customer is in the retailer’s respective loyalty program or not. If a customer is not a program member, the cashier is supposed to ask if the customer would like to join the loyalty program. But many customers prefer not to share their personal info with a cashier. While customers can go online to enroll, once a customer leaves the store, it is highly unlikely that they will enroll.
Typical industry loyalty tracking form factors include:
- A mobile number to a cashier
- A mobile phone bar code
- Loyalty cards
These loyalty tracking systems are manual, and as a result, for the loyalty system to track, the cashier has to ask every time if the customer is in the retailer’s program. This is a tedious process that slows the line and can frustrate customers who previously declined to enroll. Moreover, all cashiers are not created equally. Untrained, inexperienced, shy, introverted and lazy cashiers simply may not ask. These inefficiencies negatively impact enrollment, data accuracy, loyalty points tracking and customer satisfaction.
With regards to redemption, a fraction of the earned rewards are redeemed. Many members complain that it is too much trouble to print out a reward and bring it to the store. While breakage may be considered good for certain coupons, it is a negative for loyalty.
If you want to evaluate your own loyalty rewards gaps, consider the following questions:
How easy is your enrollment process?
How easy is tracking and redemption?
Could automation improve your loyalty program?
What percentage of your customers pay with credit cards?
A low adoption and engagement rate for loyalty programs may be remedied with innovation. I will cover further process and improvement ideas in my next article.
Today, the average household has joined 29 loyalty programs, but only actively participates in 12. Some merchants are going the mobile phone loyalty app route. But consider that there are over 1.5 million apps out there. Mobile users only download really important, relevant apps. On average that is 20-50 apps per phone. And users delete unused apps. With these hurdles, how does a smaller, less known or less frequented business get into loyalty without being one of the 17 abandoned loyalty programs or deleted apps?
The key to starting any loyalty program is enrolling members. If it is too hard, they won’t enroll. Asking customers to download an app for any merchant other that Starbucks or Walgreens is asking a lot. Maybe early adopters will hurdle the obstacle. But what about the other 90% of the customers who want to be loyal, but are unwilling to make the effort to download?
And once enrolled, declining engagement is a serious problem for loyalty programs. Does that customer really want to take 4 steps to earn points?
- Pay, then
- Pull out phone
- Open the merchant’s loyalty app
- Show the mobile loyalty app to the clerk or scan it
That is a lot of work! If earning points and redemption is too hard, the app is getting deleted.
There is a better way . . . linking the customer’s own payment card to the merchant’s loyalty program. Loyalty should be part of simply paying. Every time a customer pays with the customer’s own credit or debit card, they should earn points for that merchant’s loyalty program. Redeeming the merchant reward should be as simple as paying normally with the enrolled credit card.
It has to be easy. That means no app. That is card linked loyalty.
Transaction Trends is posting an article I published. You can find a direct link here or read the article below on my take with ISO’s as a strategic channel for card-linking.
There was a time when ISOs sold magnetic-stripe “loyalty cards,” but demand for those loyalty cards appeared to wane. However, that falloff was not the result of reduced demand but rather poor execution: Customers just did not want to carry another loyalty card. Today, loyalty is in increasing demand, and loyalty provider startups are selling loyalty devices and apps directly to small to medium-sized businesses (SMBs), to the exclusion of ISOs. Thus, two questions arise: Why are ISOs no longer in the loyalty game, and is there an opportunity to get back in? While it appears that ISOs have ceded loyalty to the startups, in 2016 card brands, terminal companies, and Software as a Service (SaaS) loyalty providers are bringing to market terminal integrated card-linked loyalty solutions that vastly improve and streamline the customer loyalty experience for merchants and customers alike—and ISOs are the only ones that can sell them.
The terminal is the ISO’s special realm. If it touches the terminal/point of sale (going forward we will use “terminal” to reference both), the merchant is calling the ISO. If ISOs want to sell loyalty, loyalty must touch the terminal. It makes perfect sense for loyalty to be tracked at the terminal because shopping is the key metric.
According to Forrester Data’s recent “Forrester Wave: Customer Loyalty, Solutions for Midsize Organizations, Q1 2016” report, “Our data shows that improving customer loyalty is likely to be a top marketing priority for 80 percent of decision makers at midsize organizations in the next 12 months. As a result, they seek loyalty solutions that help companies identify and track customers, reward behavior, and drive deeper engagement and relationships.” The loyalty market is big, and SMBs will pay for it.
Who Wants to Download a Loyalty App?
The ISOs’ execution failure opened the SMB loyalty market to firms like Belly, which does not touch the terminal. Belly’s ($99 to $200 a month) product is a separate device that sits next to the terminal, taking up counter space, with the Belly brand standing between the merchant and customer. As with many other loyalty companies, Belly requires the merchant’s customer to download the Belly app to redeem the reward. Because these devices do not touch the payment terminal, the loyalty companies do not need ISOs to sell to the merchant. They sell direct.
Notwithstanding the attempts of the loyalty startups, there is still too much friction with existing loyalty offerings. In addition to not wanting to carry another loyalty card, most SMB customers will not go online and enroll, download an app, provide their mobile number every time they shop, or print a reward. Customers are lazy—and rightfully so. Earning points and redeeming rewards should be as easy as simply paying with the credit or debit card already in their wallets.
Terminal Integrated Card-Linked Loyalty
Terminal integrated card-linked loyalty offers both merchants and their customers a superior, seamless, and easy loyalty execution by tracking loyalty with the payment cards customers already possess. With card-linked loyalty, every time customers shop and pay with their credit or debit card, they automatically earn points and redeem. No longer does a customer have to carry a separate loyalty card, download an app, provide a number with every purchase, or print a reward. The payment terminal, in effect, becomes the loyalty terminal, displacing any third-party device crowding the counter space. Card-linked loyalty becomes part of the payment process—and just happens.
A merchant’s loyalty program should be for the merchant’s best customers, with the goals of being easy and automatic, and increasing spending and frequency. This means the card-linked loyalty solution must empower the merchant to enroll its own customers, and the loyalty reward must be redeemable only at that merchant’s store. To make this happen, the card-linked loyalty program must be integrated into the merchant’s payment terminal.
As mentioned above, the merchant must be able to enroll its own customers. The single best place to enroll members is at the merchant’s point of sale. Once customers leave the store, getting them to go online to enroll and provide a credit card is almost impossible. But if the card-linked loyalty program is integrated into the terminal, linking the customer’s payment card to the merchant’s loyalty program becomes as easy as entering a mobile phone number into the terminal, one time. By integrating with the terminal, the SaaS loyalty provider sees the payment card token in real time, and, if the token is not in the loyalty program, the SaaS provider delivers a prompt to the terminal to enroll the customer. Only if the terminal is integrated with the SaaS loyalty program is it possible for the enrollment prompt to occur. But once integrated, enrolling the merchant’s customers is easy.
Today, card-linked offers are being embraced by Facebook, Twitter, Microsoft, and credit card issuing banks in a coalition format. (To learn more about card linking, go to http://www.cardlinx.org). Presently, card-linked offers are not integrated into the terminal, and, as a result, the discount can only be put back on the credit card statement or in another currency (e.g., airline miles). If a merchant wants its own loyalty program (as opposed to a coalition), then the loyalty reward should be the merchant’s reward, only redeemable back at the merchant’s terminal. Requiring the reward be redeemable back at the merchant drives another visit back to the merchant, which should be the goal of every loyalty program. With terminal integrated card-linked loyalty, when the customer pays with the enrolled card, the reward is automatically deducted from the total bill and reflected on the terminal printed receipt. It is a seamless and easy experience for the loyalty member and the merchant.
Terminal integrated card-linked loyalty automates the loyalty process, and it is the easiest and best merchant-centric loyalty solution in the marketplace. And there is only one industry that should sell it: ISOs.
Who Better To Sell Than ISOs?
SaaS companies, card brands, and terminal companies are or will be offering terminal integrated card-linked loyalty in 2016, and the ISO is the channel that should sell it. In addition to offering a complementary loyalty revenue stream, ISOs will sell terminal integrated card-linked loyalty to reduce churn. Merchants that have thousands of members in their terminal integrated loyalty program will not want to switch payment processor/loyalty providers.
Because card-linked loyalty touches the payment terminal, the exclusive realm of the ISO, the ISO is the logical sales channels for reselling terminal integrated card-linked loyalty. Welcome back to the Loyalty Game.
If you have read my blogs, you will notice a bias towards real time card linked promotions and loyalty versus delayed card linked promotions. As a refresher, delayed card linked promotions put the rewards back on the credit card statement or in some form of cash back or airline points model. That is very 1990s. The future of card linked offers I believe is real time, which enables the consumer to enroll right at the point of sale, receive real time text or email acknowledgment of points earned, and significantly, automatically redeem the reward back at the same merchant where the points were earned.
For delayed card linked offers, assuming a sale can be made to the merchant to market with delayed card linked offers, enabling the merchant to accept delayed card linked offers is not hard. All that has to happen is that the merchant needs to sign a contract authorizing his merchant credit card bank to share the data with the matching company, which then shares matches with the marketing company. This means any company can really do this. The barrier to entry is pretty small. The benefit to the merchant is smaller still as addressed in my previous blogs.
For real time card linked offers and loyalty, the barrier to entry is much higher. Real time is harder to implement because it’s integrated into the credit card terminal or the point of sale system (“POS”). The terminal or point of sale system must do three things. First, it must redirect the transaction amount to a gateway, which then relays the transaction data back into the data stream. Second the terminal or POS must be able to allow for registration at the point of sale. And third it must be able to print out the receipt showing points earned or reward redeemed. If the POS is involved, it has to account for the redeemed offer or reward discount.
There are two channels or industries that make sense for reselling real time card linked; the merchant acquiring independent sales organizations (“ISO”) sales channel and POS companies. Terminal companies use the ISO sales channel to resell their product as do many POS companies. Larger POS companies have their own direct sales teams and network of resellers. Marketing companies are not going to be able to resell real time card linked promotions and loyalty because of the integration requirements described above. This is good for the ISO industry mired in commodity pricing, and looking for the next big thing.
ISOs today are looking for products to compete with the likes of Belly, Level Up, and other loyalty companies that do not touch the payment stream. As discussed in previous blogs, Real time Card Linked loyalty and promotions require no additional steps to earn points or redeem rewards. Simply pay with the enrolled credit or debit card, and loyalty happens.
The ISO is the perfect party to resell real time card linked promotions and loyalty to the merchant. 2014 is going to be the year of the real time card linked promotions and loyalty. Stay tuned.