Kohl’s is the first to link its loyalty and credit cards to Apple Pay
One of the benefits touted by Tim Cook and company when Apple Pay launched was that it would allow consumers to both pay for goods and earn retail reward points with a single tap. That promise appears to becoming true with the announcement yesterday by Kohl’s that customers at about 250 of the chain’s stores will be able to make a payment with their Kohl’s Charge while earning Yes2You Rewards using Apple Pay.
“Kohl’s is blending the physical and digital shopping experiences in more ways than ever before. Offering conveniences to Kohl’s customers that make it easy for them — like a seamless one-tap checkout in Apple Pay that integrates our value-driven Yes2You Rewards loyalty program — is one of the ways that we are leading as an omnichannel retailer,” said Ratnakar Lavu, Kohl’s chief technology officer, in a statement. “We are continuing to innovate in mobile to provide an easy, seamless shopping experience, whether it’s our mobile payment offerings, the features and functionality on Kohl’s mobile app or the Kohls.com experience on smartphones and tablets.”
Mr. Cook expressed satisfaction with the progress of Apple Pay on the company’s second quarter earnings call last week. Speaking to analysts, Apple’s CEO said, “Apple Pay is growing at a tremendous rate, with more than five times the transaction volume of a year ago and one million new users per week. There are more than 10 million contactless-ready locations in the countries where Apple Pay has launched to date, including over 2.5 million locations now accepting Apple Pay in the United States, and more expansion of Apple Pay is coming soon.”
Discussion Questions
DISCUSSION QUESTIONS:
Do you see Kohl’s Yes2You Rewards members making the switch to Apple Pay? How likely is Kohl’s to roll out the service chain-wide and do you see other large retailers following suit?
Poll
BrainTrust
Bob Amster
Principal, Retail Technology Group
Ross Ely
President and CEO, ProLogic Retail Services
It’s about time that retailers electronically linked payment options and loyalty programs. Next, they need to add coupons and promotional discounts. By taking the first step, Kohl’s is responding to consumer demand and taking a step into the future. Other chains will be watching. Look for similar announcements in the near future.
It isn’t a question of whether or not Kohl’s Yes2You Rewards members should switch to Apple Pay. Everyone who has a smartphone and wants to pay with one of the payment methods supported by Apple Pay should make the switch.
The attraction to the consumer is two-fold. It not only enables the consumer to eliminate all credit cards from the wallet and add them to the smartphone, it also enables the consumer to complete the payment and rewards capture in a single tap (rewards programs today require the customer to present their loyalty instrument separately from their method of tender).
There is no question that Kohl’s will expand the program chain-wide. As more consumers use, and more retail establishments accept, Apple Pay, the advantage of a chain-wide rollout becomes a no-brainer. Large, medium and eventually small retailers will all adopt this form of payment-and-rewards combination. Why wouldn’t they?
So far, shopper adoption of Apple Pay and other mobile payment programs has been slow. Paying with a credit card and entering your loyalty number is not that inconvenient, and it’s unclear that mobile payment solves any problems for shoppers today.
If Kohl’s really wants this program to succeed, they should offer promotions, discounts and special offers that require the use of Apple Pay in order to jump-start the program. Otherwise, the adoption will be low as has been the case for other mobile payment programs in retail.
The change to Apple Pay is beginning to roll. It will evolve slowly (maybe not so slowly!) and surely — and of course Kohl’s will roll out the service chain-wide. All other retailers — large and small — will get on this bandwagon as fast or as soon as they can. It will play very sweet music for everyone involved.
Mobile phones, GPSes and PDAs were all good products on their own, but when combined into a single device they become “a must have.” The same thing applies to payment, loyalty and coupons. When all three are combined in a convenient way, adoption will become widespread. Kohl’s is taking a step in the right direction.
ApplePay/digital wallets can leverage this point in time to become relevant! By improving the checkout UX altering the regular process from:
1. scan a loyalty card
2. waiting for calc of benefits
3. swipe credit card (or wait for EMV)
4. sign or enter PIN code
5. take paper receipt
6. hope that loyalty points applied correctly
to:
1. tap iphone to NFC reader & confirm with fingerprint
2. payment and loyalty data transfered
3. electronic payment and loyalty points receipts
Consumers are reaching app fatigue with the explosion of apps and there are only so many apps a consumer wants on the phone. The apps that will survive are the ones that offer the most value and they use frequently. Combining loyalty and payments into one app is the wave of the future. Look to see others retailers jumping on this train.
The only down-side about tying Kohl’s loyalty app to Apple Pay is that it is only available to customers who own an iPhone 6 or newer or an Apple Watch. With Apple iPhone at about 40% market share and only 50% of iPhone users on version 6 or newer, that means only 20% of consumers will be able to take advantage of the Yes2You integration with Apple Pay. I am sure Kohl’s is working to integrate with some of the other platform’s mobile payment apps.
Apple is continuing to take more and more market share from everyone else and with the opening of the India market to LTE look for Apple to explode its footprint and in turn look for Apple Pay to widen its lead in the payment space.
While the headline that Kohl’s has linked its “loyalty and credit cards” to Apple Pay is technically correct, the underlying mechanics are so simple that I’m surprised more retailers have not already made this connection.
ApplePay is a gateway and it depends on a consumer linking the card (or cards) of their choice to complete a transaction. Linking a payment card that offers rewards automatically generates the reward on the retailer side of the transaction. For example, if a person links a cobrand airline or hotel card to ApplePay, they earn rewards. Does this mean that we should have announced that American Airlines and Delta have linked their loyalty and payments cards to ApplePay?
For Kohl’s, linking its private label credit card is brilliant. Other retailers should do the same to create a better checkout experience for customers. It is interesting, however, to examine how the ecosystem works to better understand what has just taken place.
Yes2You and its members gain by integrating rewards with mobile payments. Today’s story is Apple Pay and Kohl’s, but tomorrow’s stories will be the other ‘Pays and other retailers.
While Apple Pay got the head start, others will make the market. Take Samsung Pay, which already has a larger base.
First, it has more merchants. Terminals that support Apple’s requirement for NFC compatibility are slowly rolling out in the US. Terminals that support Samsung’s MST are virtually everywhere.
Second, it sells more units (at least for now). In March, Samsung had 29% share of new sales while Apple had 23%. The Galaxy S7 drove the gains.
Today, Apple Pay has more banks, mindshare, but little usage. It is the tip. The tipping point will be when Android Pay, Samsung Pay, LG Pay, and others integrate loyalty into their mobile transactions. Plastic loyalty cards and fobs will go the way of S&H Green Stamps.