Consumer loyalty shapes payments of the future

By Chris Baumann, head of value added services/innovation, SIX Payment Services

Those close to the payments industry will no doubt be aware of a growing desire among consumers to take advantage of reward programmes at point of sale (POS) terminals.

For payment services companies and merchants, this represents a major opportunity to tailor their reward efforts to meeting consumer needs in real time, bolstering loyalty and creating new connections with consumers.

What we have found is that consumers are more trusting: where they are already involved in a loyalty programme, they’re open to extending this relationship and trying more things. They’re aware of different points-based schemes and remember where they gained rewards, but it’s a new kind of brand loyalty and loyalty to merchants, which creates the opportunities for new brand experiences.

The brand experience as we know it has changed dramatically in recent years. People more often buy online than face-to-face – they click on items and then pick them up, so the consumer journey is very different. Consumers now judge businesses on their online and physical experience: even if they’re rewarded for purchases, if those experiences weren’t good, they won’t come back.

What has worked well recently is where there’s a complex buying process, consumers automatically gain points or rewards. E-commerce sites and physical point of sale terminals automatically identify consumers, so they don’t need to show a loyalty card, or even remember that they have one. Consumers appreciate this convenience and smart use of technology.

Attractive rewards

The most attractive loyalty rewards are the most personalised, we believe. They have to be adapted to the customer. For example, you wouldn’t give pet food to a consumer who doesn’t have a pet, but you would offer discounts on children’s goods to a consumer with children. It’s about relevance in the moment of rewarding and keeping an eye on strong content personalisation opportunities.

There is merit in offering straightforward, unemotional rewards like cash-back promotions, which are easy for consumers to understand. But emotionally-relevant rewards have a bigger impact and are likely to generate a more memorable consumer experience and in turn increased loyalty.

The role of technology

Technology is of course key to achieving an effective loyalty programme. The strategy is to build core services where a technology partner plays a role in the system, to enable loyalty programmes to function seamlessly.

For example, identifying consumers at POS terminals, to enable personalisation and delivering vouchers in real time during the buying process. The role is to be a crucial partner, to lock together the loyalty and payment ecosystem and deliver the best possible service.

There has been a growth in ‘alternative currencies’, as a means of rewarding consumer behaviour. This can mean greater use of tracking and monitoring consumers, in exchange for personalised rewards or engagements. An increasing number of consumers now say that they are happy for this transaction to take place, particularly more affluent people and those born after 1990 (‘Generation Z’). The kinds of benefits that appeal to this group include wi-fi access, express check-out lines, choice of rooms in hotels and ways to ease travel bottlenecks, such as security clearance at airports.

A new collaboration

Payment services companies can drive through new services, collaborating with international loyalty schemes and multiple partner programmes, connecting merchants to these schemes through an onboarding process. The payment service providers technically integrate merchants though contractual relationships.

These relationships can function both as a USP in markets which are less developed from a payments standpoint, building up reasons for merchants to employ these services, and as a retention strategy in more developed markets, allowing merchants can offer new reward schemes to their consumers.

For merchants, other advantages include a simplification of payments processes, such as consumers not needing to show their loyalty cards; for consumers, this is also a major plus, because they would rather have automated rewards, saving them from having to remember to show their cards.

Looking to the future

Technology is consistently delivering new opportunities in this field. Consumers will gain loyalty rewards in real time far more often and more easily in future, as merchants gain more knowledge of their customers and can reward loyalty or enable consumers to redeem tokens.

Payment services providers will soon introduce more ‘real time’ products, as technology allows them to integrate further into the consumer buying process. There are already partial versions of real time loyalty reward schemes in development and undergoing trials, as any obstacles or challenges are overcome.

This kind of product is typically installed at the back end of a point of sale system, meaning that it integrates easily with merchants’ own IT systems in an unobtrusive way. The benefits are both additional convenience for merchants and for end users.

There will also be growth of paid-for loyalty schemes, such as Amazon Prime, where consumers pay a premium to join a membership programme, offering them benefits such as faster shipping or discounted rates. Members of Amazon Prime reportedly shop twice as frequently as other customers and spend twice as much.

Related reading