American Banker reports that consumer banks, while late to the game, have come to realise that they will need to join retailers and travel providers in digitizing their loyalty programmes and linking them to mobile wallets. The realisation: Mass affluent consumers have already adopted mobile payments- and with Millennials soon to follow (that is, if they choose to take up a credit card at all), the long-prophesied death of plastic credit and debit cards may finally arrive.
The meat of the American Banker take is provided by a recent global survey of 6,000 mass-affluent consumers (defined as consumers in the top 15% of earners globally) by Collinson Group. Among the survey's key findings:
- 66% of U.S.-based respondents use digital payments "whenever they can."
- 23% say they use digital coupons on their smartphones.
- 83% of mass-affluent consumers enroled in bank loyalty programmes globally spend more than other members.
Those numbers speak to the importance of loyalty programmes in the fight for mobile payment adoption. Banks have long leveraged rich reward programmes to keep their credit cards top of wallet with consumers; with the battle shifting to digital wallets, banks that fail to leverage loyalty to encourage mobile wallet adoption and usage face a future of an increasingly smaller and older user base for plastic credit cards. Someday soon, younger consumers may view shoppers who reach for plastic cards with the same mildly bemused disdain that Gen-Xers view the olds who still reach for their paper checkbook at the point of sale.
American Banker quotes Lars Holmquist, senior vice president for the Americas at Collinson Group, as predicting that banks will soon ramp up their efforts to migrate their loyalty programmes to mobile. He cautions, however, that just allowing consumers to view points balances on their smartphones won't be nearly enough to compete. Money quote from Holmquist:
"The traditional financial services firms actually have a clear opportunity to deliver highly engaging, digitally driven loyalty initiatives due to the wealth of data they collect. They need to go further in terms of using this data to improve targeting and segmentation to appeal to distinct audience groups."
Amen to that. Personalisation, relevance, and programmes placed in service of building sustainable long-term relationships will carry the day in the mobile wallet turf wars. Banks will need to arm up for the fight.
Read the American Banker article here.
-Rick Ferguson
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