News, Education and Events Decoding Digital Payments & Fraud

News, Education and Events Decoding Digital Payments & Fraud

Loyalty—The Missing Link for Mobile Wallet Adoption

By Allison Ward, Account Director, Walker Sands Communications Excitement over the future of mobile wallets has skyrocketed throughout the last year—and for good reason. According to the 2015 Global Payments Report from e-commerce processor and acquirer Worldpay, total U.S. spending via mobile devices is expected to reach $647 billion by 2019—nearly one-fourth of the global e-commerce industry. While mobile wallets may be closer to reaching their full potential than ever before, a fragmented payments landscape continues to hinder widespread adoption. From device specific mobile wallets—Android, Apple and Samsung Pay—to retailer-driven mobile wallets from Walmart and CVS, consumers face the challenge of choosing between a variety of mobile wallets for different use cases. The emergence of bank-driven mobile wallets such as ChasePay only further complicates matters. Although each type of mobile wallet is significant in its own way, contrasting applications often lead to a disjointed payments landscape for consumers. Integrating loyalty programs into mobile wallets is one way to change that. By enabling consumers to earn and burn points wherever loyalty programs are accepted, retailers and payments professionals have the opportunity to both simplify the payments experience and boost mobile wallet adoption. Added Value Despite the fact that mobile wallet technology has seen steady improvement in recent years, adoption rates continue to lag. Concerns over payment security and efficiency have kept many consumers from substituting mobile wallets for traditional payment methods. And without consumer buy-in, merchants have been slow to develop reliable security measures and infrastructure that might gain the approval of uneasy consumers. For retailers and merchants, spurring adoption of mobile wallets comes down to one thing in particular—value. By providing consumers with greater value during each transaction, merchants can win over consumers who previously steered clear of mobile wallets. From receiving discounts on upcoming purchases to earning points toward rewards, loyalty programs can provide consumers with the added value they crave. In fact, collaboration between mobile wallets and loyalty programs will soon be here. Royal Bank of Canada recently announced a partnership with loyalty currency management company Points to offer full loyalty integration within its mobile wallet. With loyalty functionality built directly into a mobile wallet, not only can consumers conveniently earn and use loyalty rewards, but the door is opened for merchants and wallet providers to use the mobile wallet as a marketing channel as well. Merchants can deliver hyper-relevant, targeted offers based on a consumer’s past purchase history and location data, using loyalty to incentivize transactions. For retailers and merchants, this added value will not only lead to greater user engagement, but ultimately higher adoption rates for mobile wallets. Enhanced security When it comes to mobile transactions, one of consumers’ biggest hesitations is security. A study carried out by YouGov on behalf of Firstsource Solutions found that roughly eight out of 10 people have concerns about the security of contactless mobile payments. With the integration of loyalty programs, however, fear of fraud may soon become a thing of the past. In addition to using much of the same fraud infrastructure and security tools developed by the credit card industry, loyalty programs also provide consumers with an extra layer of protection during transactions. On top of authenticating a purchase with their mobile wallet, consumers must also obtain approval from the loyalty program itself. This added step helps make loyalty-driven transactions inherently safer. The integration of loyalty programs in mobile wallets also enables consumers to use points they’ve earned to make purchases, thereby eliminating the need to pass on credit card information to merchants. Starbucks, for example, rewards its loyalty program members with stars that can later be redeemed for a free beverage. Rather than sharing personally identifiable information through a credit card transaction, consumers can sign up for a loyalty program and then use their mobile wallet to spend rewards they’ve racked up over time. Although such measures may be enough to ease consumers’ concerns, loyalty programs continue to search for ways to secure loyalty rewards as a form of digital currency. Two-factor authentication can help turn that idea into reality. By requiring users to enter their password along with an authorization code sent through email, text message or a phone call, two-factor authentication helps thwart fraudsters who have stolen a user’s password. Concerns over the security of mobile wallets have run rampant. With the integration of loyalty programs, mobile wallets may be in for an upgrade. Multiple points of authentication coupled with the absence of sensitive consumer information could bring an end to the fear of fraud that has long plagued mobile wallet adoption. From increased mobile spending to enhanced technological capabilities, the stage is set for mobile wallets. Growing pains that have previously delayed adoption are now a distant memory. But while much has been made about the future of mobile wallets, a divided payments landscape continues to threaten the idea of mainstream adoption. Varying use cases among retailer- and bank-driven mobile wallets along with device-specific mobile wallets has left consumers searching for a simple and efficient payments experience. Through the integration of loyalty programs, mobile wallets may finally be able to provide consumers with just that. Not only will consumers have the opportunity to earn and redeem loyalty rewards as they shop, but they will also be better protected from cybercriminals interested in compromising personal information. With these added benefits in place, concerns over the value and security of mobile wallets may finally give way to widespread adoption. Alison Ward is account director for Walker Sands Communications. Walker Sands is a technology-focused PR company serving multiple clients connected to the CNP payments industry.

Daniel Leibovitch