Technology has already made a huge impact on the way consumers shop and make payments today, and more change is coming. Businesses that want to thrive in this payment and credit evolution need to invest in technologies that will help them retain and attract customers.
Payments Integrated With Loyalty Programs
In the past, most loyalty programs were expensive to run and difficult to manage.
However, modern loyalty programs are now integrated into POS systems making it easy to:
- Track individual customer payments
- Deliver personalized rewards
The most popular programs offer spending and payment-based rewards that incentivize customers to choose their brand and/or use their cards.
Credit Card Rewards Programs
Along with no annual fees, rewards programs are the top draw for new credit card customers.
Card issuers typically offer points with monetary values that accumulate based on a cardholder's spending. Cardholders can apply these points to account balances or redeem them for benefits such as:
- Cash back
- Gift cards
- Travel perks
Cash back is the most desired consumer reward, with most card issuers offering anywhere from 1 percent to 5 percent back.1
Some simply apply points when the purchase is made, while others split points between purchases and payments.
Merchant-Branded Card Rewards
Merchants can integrate rewards directly into their branded card programs. Below are three examples of how this works in practice:
- Open-Loop Rewards
Amazon and Old Navy offer open-loop Visa cards that can be used anywhere. However, cardholders only receive points for purchases made from the issuing merchant. - Closed-Loop Rewards
Other retailers offer closed-loop cards not affiliated with a card network. These cards can only be used at that specific retailer. This lowers transaction fees for the merchant and allows it to offer customers better perks - Target’s Reward Program
Target’s REDcard gives cardholders a 5 percent discount off almost every item purchased (some exclusions apply). It is unique in that it is offered both as a credit card and as a debit card:- With the credit card, consumers charge their Target purchases and receive a monthly bill
- With the debit card, purchases are deducted from the consumer’s linked checking account
Many other retailers, including Macy’s, Nordstrom, and Kohl’s, also have rewards programs attached to their credit cards.
Gift Cards Linked to Loyalty Programs
The increasing popularity of gift cards has turned the gift card into true branded currency. Merchants are capitalizing on this by offering reloadable closed-loop gift cards linked to their loyalty programs. Once a card is purchased, the cardholder can add funds to it:
- Online
- Via app
- In-store
Anytime customers use it to make a purchase, their loyalty account is automatically credited. Starbucks’ loyalty-linked reloadable gift card is a great example of this. The success of its program has incentivized other merchants to follow suit.
How Frictionless Payments Have Sped the Evolution of Commerce
Consumers today expect every purchase they make to occur seamlessly, regardless of the payment method or channel they use.
Thanks to technological breakthroughs, it is now possible to integrate payments into the buying experience – whether shopping in-person or online.
For example, websites, apps, and devices can securely store payment information so there’s no need for a consumer to:
- Grab their wallets
- Find their checkbooks
- Enter personal data
For the consumer, it’s about speed and ease. For merchants, this convenience translates to more payments and higher profits.
The Rise of Omnichannel Payments
Omnichannel payment technology enables consumers to seamlessly connect their shopping experiences from one device to the next.
For example, when a consumer reloads a gift card on his or her tablet, this information instantly appears on his or her car’s dashboard and smartphone. The customer can now shop with those funds without having to travel with his or her tablet.
How Omnichannel Payments Work
There are many ways to set up multichannel payments for your business.
For example:
- First Data partners with Independent Software Vendors (ISVs) to set up digital payment-enabled apps for Quick Service Restaurants (QSRs) so customers can order in advance from their car dash or mobile device, and pay with their phone at the drive-thru or in-store.
- First Data also works with auto manufacturers to make cars more “connected” to the consumer. In addition to sending notifications about the next oil change, the car’s built-in technology can also deliver a coupon from a nearby auto shop, schedule an appointment, and pay for service.
The Evolution of eCommerce and the Internet of Things (IoT)
Want to really understand the evolution of eCommerce and where the technology is going?
Amazon Echo and Google Home offer a glimpse into the future.
These digital smart assistants link consumers to other smart devices and enable users to simply speak their purchase preferences. For example, “Google, order paper towels.”
As long as the item is available from a partner merchant, the device handles the rest of the purchase using stored payment information and shopping preferences.
Eventually, these digital assistants won’t even require consumer interaction because they’ll be linked directly to home appliances via the Internet of Things (IoT).
As more and more physical objects are embedded with software, sensors, and network connectivity, the IoT will grow to a point where appliances will be able to sense when a staple product is running low.
In other words:
- Refrigerators will be able to order milk
- Washing machines can buy detergent
- Cars can book their auto inspections
Payments in the New Economy
The phenomenal rise of shared, subscription, and gig services has created a new economy – one driven by recurring payments that occur without any action required of the consumer.
Once a payment schedule is set up, all future payments happen automatically, whether a customer is:
- Renting a house on the beach through Airbnb
- Receiving a monthly package of dog treats
- Ordering an occasional ride from Uber
The Role of Big Data and Analytics
The sales data businesses collect helps them make better decisions and create more successful strategies.
Capitalizing on this data used to be expensive and time-consuming. Today, businesses of any size can integrate technology that collects and reports data into their payments platforms.
Armed with tangible information about their sales and customers, businesses can:
- Better identify untapped growth opportunities
- Create more personalized marketing to build loyalty
- Adjust pricing and inventory to attract new customers
However, the growth of big data continues to fuel privacy concerns, as evidenced by:
- The General Data Protection Regulation (GDPR) in Europe
- The California Consumer Privacy Act of 2018 (CCPA)
These regulations require organizations to obtain consent from consumers before collecting and using their data.
Technology-Enabled Personalization and Targeting
Merchants are capitalizing on consumer data by:
- Creating personalized rewards that match the exact tastes and habits of their customers
- Delivering these customized rewards at time and places when they’re most relevant
For example, merchants, like Starbucks, have started integrated geo-location marketing into their apps. This allows them to deliver real-time offers whenever a customer is near one of their locations.
They make sure the offer is enticing by using:
- Personalization tools that analyze each customer’s previous purchases
- Artificial Intelligence (AI) to predict what those customers will buy in the future
This way, customers don’t receive offers for a free caramel macchiato if they consistently order double espressos.
Source
1 “How Cash Back Credit Cards Work,” Creditcards.com, 29 January 2018
