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?

As we discussed in my last post, there are three essential elements of loyalty; 1. Enrollment; 2 Engagement; and 3. Redemption. Today we discuss card linked enrollment for a merchant’s loyalty program.

There are two types of card linking loyalty options; terminal agnostic and terminal integration.  Terminal agnostic is 100% in the cloud and does not touch the terminal.  In fact that is a major benefit of terminal agnostic card linking.  The card brands, MasterCard and Visa are offering to marketing platforms, card linking solutions that integrate with loyalty solutions, like the BP card linking loyalty solution recently rolled out. But there is one drawback with terminal agnostic card linking; enrollment is too hard.

Convincing a shopper to go online and provide a credit card number for a single merchant’s loyalty program is hard. While an advocate of a major brand like BP may go online and enroll, the average customer for an average merchant is not. It is just too hard.

Another terminal agnostic card linking enrollment option is to first ask the customer to download a mobile phone loyalty app for the merchant’s loyalty program, and then if the app is downloaded, second ask the customer to set up an account in the app, and third, enter their credit card for the loyalty program.

The problem here is that the average smart phone user already has 26.7 apps on the cluttered phone. Remember share of wallet? Now there is a share of mobile phone screen space.  The app is probably not getting downloaded.  The other issue is that 70% of the total usage is coming from the top 200 apps. (Nielson   06-11-2015) What are the chances the customer will take the time to download the loyalty app just to link the credit card to the merchant’s loyalty program?  There is another way.

Terminal integrated card linking excels at enrollment, and here is why.  When the customer pays with a payment card, a card linking platform like vPromos in real time can see if the payment card token is in the loyalty program.  If not, a message like the one above is sent to the terminal, prompting the customer to provide a secondary unique loyalty identifier like a mobile number.

Before EMV, trying to integrate card linking with point of sale systems was hard. There were just too many POS systems to integrate with. And POS systems were notoriously unwilling to make it easy to integrate because of PCI requirements.

After EMV, the payments landscape is changing. Now most POS companies are no longer processing credit cards. That responsibility of credit card processing is left to the terminal companies. There are just a handful of terminal companies, and these companies are entering the card linking space.  For example, Verifone, the terminal leader in the US, is taking the lead in the terminal space with its Card Commerce initiative which will enable terminal integrated card linking. Terminal integrated card linking is about to take off in 2016.

What are your thoughts about how to take advantage of terminal integrated card linking?

A loyalty program delivered smartly will attract new customers, turn customers into repeat customers, increase business, and deliver valuable business data and demographic intelligence. While the world today expects elegant solutions achieved through technology and automation, it’s clear that most of today’s loyalty solutions, are still reliant on manual execution. As a result, the loyalty process interrupts the payment process and is often prone to delivering a poor experience for both the customer and merchant.

We can do better. It is time for loyalty programs to enter the twenty first century and become automated. A merchant loyalty program linked to the customer’s payment card offers all parties an easy, seamless, automated, reliable and accurate loyalty solution.

There are typically three basic challenges with loyalty programs that every CMO wants to improve:

1. Enrollment – Cashiers don’t always ask customers to enroll, and customers don’t always want to supply personal information to a stranger.
2. Tracking – Again, the problem is that cashiers are not always asking for loyalty numbers or cards associated with loyalty.
3. Redemption – Customers are not redeeming rewards as expected.  They say it is too hard to download rewards and remember to bring to the store.

The reality is that everyone, including your loyal customers want convenience in their busy lives. One company, British Petroleum (BP), is making it easy for their loyal customers to earn points and rewards.

BP just introduced its card linking loyalty solution at the gas pump. Historically, customers had to swipe their loyalty card or enter a 10 digit number. BP customers can now go online and link their payment card to the BP loyalty card.  

After linking the credit card, a BP customer earns points every time they pay.  No additional steps to take. To redeem the rewards, the BP customer simply pays, and the reward comes off on their linked credit card statement.  Today this only works with Visa, but it is still a huge convenience for BP customers.

Retailers need to make it easier for customers to enroll, track and redeem rewards. That means in addition to letting customers earn and redeem points by showing their loyalty card or providing their mobile number at checkout, we should let our customers earn and redeem rewards with their existing credit or debit card.

Loyalty Program Background and Challenges

Today, a loyalty tracking system is typically manual. This means every time a customer pays, the cashier must ask: “Are you in our reward program?”

This question must be asked every time because a manual loyalty tracking system has no way of knowing whether the customer is in the retailer’s respective loyalty program or not. If a customer is not a program member, the cashier is supposed to ask if the customer would like to join the loyalty program. But many customers prefer not to share their personal info with a cashier. While customers can go online to enroll, once a customer leaves the store, it is highly unlikely that they will enroll.

Typical industry loyalty tracking form factors include:

• A mobile number to a cashier
• A mobile phone bar code
• Loyalty cards

These loyalty tracking systems are manual, and as a result, for the loyalty system to track, the cashier has to ask every time if the customer is in the retailer’s program. This is a tedious process that slows the line and can frustrate customers who previously declined to enroll. Moreover, all cashiers are not created equally. Untrained, inexperienced, shy, introverted and lazy cashiers simply may not ask. These inefficiencies negatively impact enrollment, data accuracy, loyalty points tracking and customer satisfaction.  

With regards to redemption, a fraction of the earned rewards are redeemed. Many members complain that it is too much trouble to print out a reward and bring it to the store.  While breakage may be considered good for certain coupons, it is a negative for loyalty.  

If you want to evaluate your own loyalty rewards gaps, consider the following questions:

How easy is your enrollment process?

How easy is tracking and redemption?

Could automation improve your loyalty program?

What percentage of your customers pay with credit cards?

A low adoption and engagement rate for loyalty programs may be remedied with innovation. I will cover further process and improvement ideas in my next article.