Category: Blog

The Impending Battle for Card-Linking

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:

Part 2: Why Terminal Integrated Card-Linked Loyalty is the Holy Grail

36086683 - bread and wine holy communion sign symbol
Holy Grail

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:

  1.   Credit cards work perfectly fine for payment; and
  2.   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:

1.    Give up personal information e.g. mobile number

2.   Be marketed to e.g. text message loyalty updates

3.   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?

Part 1.  Its the Wine, not the Vessel that Matters; Why Mobile Wallets Failed

Part 1. Its the Wine, not the Vessel that Matters; Why Mobile Wallets Failed

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:

  1. Set up a payment card in the mobile wallet;
  2. Learn a new behavior (pay with phone instead of card); and
  3. 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.

The Terrible Idea of Terminal App Stores

pos apps

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?