Mobile-based loyalty programs, coupons, and other offers are increasingly viewed as the catalyst to help drive the shift to mobile wallet use at the point of sale. However, these services are likely to fall on deaf ears unless wallet providers make use of applied analytics capabilities and offer targeted personalized rewards to consumers, potentially shaking up not just payments but the broader merchant environment as well.
Good data is key to driving personalized offers through the wallet
Mobile proximity payments have to date proven lackluster. Despite hundreds of millions of dollars spent on developing these platforms, consumer take-up remains virtually nonexistent. Loyalty rewards and benefits via the digital wallet are now seen by many as the “killer app” that could help to finally kickstart the mobile proximity payment market.
As highlighted in Ovum’s recent report, “Loyalty and Location-Based Payment Services”, this remains easier said than done. The loyalty market itself continues to undergo a rapid evolution just as powerful as that in the payments space. In particular, the loyalty market is rapidly becoming inundated with offers and daily deals, leading to a growing need for more personalized and targeted offers to consumers to help maintain engagement levels among an increasingly fickle audience.
Achieving this from a merchant or bank perspective requires the development of extensive Big Data capabilities that extend beyond just traditional top-level basket transaction data to include applying analytics on a range of consumer data down to location and SKU-specific data. This will require greater levels of cooperation between payment providers and merchants and represents a growing market opportunity for third-party loyalty and analytics vendors such as Aimia, Oracle, and IBM, as well as start-up players.
Payment providers today already hold a rich seam of transaction data that can be applied to loyalty programs. However, much of this data remains largely unstructured, and the needs of modern loyalty programs remains largely ill-defined. Wallet providers who can crack this and create a broader payments loyalty ecosystem have the potential to both drive mobile wallet usage and create new consumer retail experiences beyond the point of sale.
Loyalty and Location-Based Payment Services, IT0003-000614 (July 2014)
Assessing the Long-Term Impact of mPOS on the Payments Market, IT003-000604 (February 2014)
Gilles Ubaghs, Senior Analyst, Financial Services Technology