Will mobile wallets replace plastic loyalty cards?

May 15, 2017
Tom Ryan

According to a survey from CodeBroker, the biggest consumer complaint with loyalty programs is simply carrying the plastic card itself.

Forty-three percent of the 1,207 U.S. consumers surveyed ranked physical cards as their biggest pain point with loyalty programs. Another 17 percent cited looking up a missing card while 15 percent said it was linking a card online.

At the same time, 71 percent would be more likely to use their loyalty cards if they could access these cards and rewards from their mobile phone.

Having an easier way to manage rewards — point totals, expiration dates, personalized coupons, etc. — was a primary reason consumers are looking for simpler mobile access. Of the respondents, 65 percent had attempted to redeem a reward at POS and found it expired, 43 percent saw rewards expire before they could be redeemed and 38 percent never knew if they had rewards available. Only 24 percent felt they understood their loyalty programs and how to earn rewards and change tiers.

A survey last year from Vibes found that another incentive to saving loyalty cards on smartphones is reducing the need to carry plastic cards or key fobs. Vibes asserted the greater openness to digital loyalty is partly tied to the arrival of mobile wallet applications that can store point balances and loyalty levels in real-time.

Also, as mobile payment adoptions slow due to security concerns and a lack of direct benefits, incorporating engagement tools such as loyalty may help.

According to a survey last year from Urban Airship, 73 percent of respondents were more likely to join a loyalty program if points and rewards are automatically updated and immediately visible on mobile wallet loyalty cards.

The same survey found that loyalty ranked as the top mobile wallet item consumers wanted, at 67 percent. Also ranking high was being able to view order delivery date, mobile payment via credit card, and reminders (expirations, balances). Forty-four percent wanted sales updates (notifications for sales), 41 percent digital receipts/warranty and 39 percent, gift cards.

DISCUSSION QUESTIONS: Will mobile payment likely replace the need for plastic loyalty cards? Do you see mobile access overall being a game-changer for loyalty efforts?

"The days of a physical loyalty card or even having to provide other forms of identification are behind us."
"The real question is: what’s taking so long? People aren’t carrying around plastic loyalty cards anymore."
"Are loyalty programs better served by mobile platforms than a plastic cards? The answer is yes if consumers track points and use coupons..."

Join the Discussion!

20 Comments on "Will mobile wallets replace plastic loyalty cards?"

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Art Suriano

Yes, I agree that loyalty cards and credit cards are both a lot to carry and have become overwhelming. Some retailers have the customer’s phone number, so if customers aren’t carrying their reward card they can still get the benefits once they provide their phone number at checkout. But having it all on mobile makes more sense. Apps already exist that allow scanning of all your rewards. I use one for convenience. However, as technology continues, I think someday we won’t carry any plastic cards or cash. Maybe we’ll just place our thumb on a scanner or eye into a retina detection device. Technology is moving faster than ever, so I never rule out any possibilities about the future.

Max Goldberg

Most retail loyalty cards are tied to a phone number. I haven’t carried a physical card for shopping in years. That said, linking loyalty programs to mobile phones makes sense. It won’t be a game changer, but it will make life simpler.

Lyle Bunn (Ph.D. Hon)

Loyalty identity should be mobile phone-based, otherwise those lesser-used cards and fobs will just not make it to transactions, which is surely a de-branding incident. If mobile is the third arm of a consumer and it goes everywhere every time, placing loyalty info into that device serves the consumer and the retailer/brands.

Brandon Rael

The expectation set by Starbucks and other leaders in the loyalty and mobile payments space is that there is a seamless integration to create the frictionless experience that consumers are seeking. Starbucks, for example, has created a loyalty and mobile program that is engaging, provides transparency to your awards status and also provides additional incentives beyond loyalty points, i.e., Spotify-curated radio playlists, free premium mobile app downloads, etc.

The days of a physical card or even having to provide other forms of identification are behind us, with Millennials, Generation Z and other digital natives leveraging their mobile device for virtually all their day-to-day social communications, banking and everything else. So the future is now … and it’s a mobile world.

Gene Detroyer

Will mobile payment likely replace the need for plastic loyalty cards?

Do you see mobile access overall being a game-changer for loyalty efforts?
No game-changer here. Everything is already attached.

Ricardo Belmar

The answer is an absolute yes. The proliferation of cards and fobs that brands want us to carry to demonstrate loyalty has long since reached the breaking point for most consumers. It makes perfect sense for mobile wallets and apps to take the place of plastic for loyalty. Loyalty programs only work from the consumer’s point of view if they are frictionless and automatically surface rewards for the consumer to use. Mobile makes this very easy. Just look at the Starbucks app and loyalty program for a great example. There are others as well — for instance, American Express makes their rewards program easy to use (although they already have the plastic in your wallet if your a member!).

People don’t want more cards in their wallet, they want fewer, and it’s past time for all loyalty programs to leverage mobile to deliver the best experience and maintain customer loyalty.

Pavlo Khliust

Plastic loyalty cards will be replaced with mobile payment solutions as soon as security concerns with mobile data transfer are resolved. As Mr. Goldberg noted correctly, most loyalty programs are already tied to a customer’s phone number. However due to technical limitations of such a solution, users may still be unaware of ongoing promotions, loyalty points count and reward expiration dates. Because of that, we may expect a unified (all-in-one) mobile loyalty solution to emerge in the near future. It will provide much-needed clarity and create an overall better customer experience.

Ron Margulis

I was just commenting to someone last week that I’m surprised this hasn’t happened more broadly already. I give plastic loyalty cards less than five years.

Ed Rosenbaum

I agree with Max. I have not carried a loyalty card in years. All you really need for most programs is your phone number. On the other hand, my wife carries most of her loyalty cards with her. It’s too much of an effort for me. I still can’t see this as a game changer. The game has probably already changed and this will just make it simpler.

Peter Charness

The basic capability of capturing and displaying a loyalty card number or bar code has been around for years. The more interesting question while we contemplate the future world of mobile payments is why mobile applications haven’t already replaced the plastic card or key fob or phone number.

Ralph Jacobson

Currently if the retailer doesn’t have the capability for me to input my phone number at the POS rather than swiping their “frequent shopper” (I still refuse to call then “loyalty” cards because we all have competitive cards in our wallets) card, I simply don’t shop there. This is what every retailer needs to do as they become more mobile-enabled.

Dan Frechtling

Are loyalty programs better served by mobile platforms than a plastic cards? The answer is yes if consumers track points and use coupons, such as in the case of high-frequency trips like getting coffee. But the answer is maybe in the case of low-frequency trips such as getting haircuts, where the utility is no greater than a punch card and the hassle of installing and fumbling for an app looms larger.

But the question was about digital wallets, which are more than loyalty card holders. Digital wallets are payment mechanisms, like Paypal, Apple Pay and Masterpass. Consumers are highly unlikely to pay with merchant-specific digital wallets just to earn points, except for rare exceptions like Starbucks. This places the leverage in the hands of the digital wallet providers, who would be well-positioned to offer federated loyalty programs like Plenti.

Lee Kent

I hope so!

Phil Rubin
8 months 7 days ago

Without question, mobile adoption for payments and loyalty are the future (and for leading brands, the present). However, mobile adoption and integration is not a silver bullet to reverse the negative trends in loyalty program engagement and participation.

The bigger issue is the dearth of effective relationship marketing to support the loyalty programs and demonstrate brands’ ability to recognize customers. It will take more than mobile to solve these problems, but rather some significant shifts in how retailers and other brands employ loyalty strategy on an enterprise wide and brand-driven basis.

Meaghan Brophy

The real question is: what’s taking so long? People aren’t carrying around plastic loyalty cards anymore. Sure, loyalty accounts can be looked up by phone number. But that’s a pain point for both shopper and employee. Mobile access in terms of loyalty cards won’t be a game-changer, so much as simply meeting consumers’ expectations

Min-Jee Hwang

Mobile payment should have replaced the plastic loyalty card system for a while now. With services like Android Pay and Apple Pay, there’s almost no reason not to other than an unwillingness to work with either company to prevent giving them a cut. Should a company choose to push their own app, many would object to having multiple apps as opposed to a single unified app. It would make life more convenient, but cooperation is hard in such a competitive landscape.

JJ Kallergis
As others have mentioned, we are far past plastic loyalty cards, even if it is as simple as looking up a phone number or email. However, I do disagree with the general sentiment that mobile loyalty access is not a game-changer. Starbucks is frequently given credit for leading in the mobile app and loyalty space, but I would argue that one restaurant that is more advanced from the customer point of view is Panera Bread. Their Panera 2.0 initiative has done a far better job blending the online/offline experience and has native integration with Android or Apple Pay, so you do not have to load money to the app. With the ability to apply personalized offers/promotions, order your food after sitting down at a table, order from the mobile app for rapid pick-up and now order for delivery, I would venture to say they are the most advanced omnichannel food retailer out there and the loyalty integration across these different experiences is seamless and frictionless. The only area they could actually improve is at the… Read more »
Ken Morris
Linking loyalty programs to mobile payments is smart strategy. Digital loyalty programs are the way of the future and the transition is likely to be fast. The key will be if a retail-specific app or a wallet-based app will be preferred by customers, and that probably depends a lot on the brand/category and the individual customer. With growing app fatigue, many consumers don’t want to add another app to their phone unless it is for something they will use very frequently. Wallet-based mobile loyalty programs give consumers another choice in how they interact with a retailer’s loyalty program and don’t require separate apps for loyalty and payments app. Retailer-specific loyalty mobile apps will still appeal to very frequent shoppers of brands, as they enable expanded features like gamification, geo-location and use of consumers’ photo capabilities on their phones. Starbucks is a great example of of retailer doing this very well. Most retailers will continue to offer multiple interaction models for their loyalty program — physical cards, apps and wallet-based mobile programs — so consumers can… Read more »
Dave Nixon
Dave Nixon
Data Analytics Solutions Executive, Teradata
8 months 6 days ago

If you can streamline the experience and ease of use, your adoption will go up. How many of us have cards stashed in remote locations that never come out (my car’s glovebox, for instance). It’s like QR codes. If they would have built the inherent scanning ability INTO the phone, people would have adopted them. Make the form factor frictionless from the CUSTOMER’S perspective and this is a NO BRAINER.

Franklin Chu

This is definitely a trend. Digital loyalty programs and mobile wallets – which replace physical loyalty cards – offer superior convenience, as shoppers no longer need to carry multiple retail cards in their wallet or purse everyday. Also, it can be really frustrating for shoppers to show up in a chain store and discover they cannot receive loyalty rewards because they forgot to bring their physical card or they entered the wrong mobile number. By contrast, mobile wallets integrate loyalty programs and mobile payment.

In China, consumers already use mobile payment options Alipay and WeChat Pay as their one-stop solution for loyalty rewards. After paying by mobile, users can sign up for membership programs with a few clicks, saving them time and the hassle of looking for physical loyalty cards, while speeding up the checkout process in the future.

"The days of a physical loyalty card or even having to provide other forms of identification are behind us."
"The real question is: what’s taking so long? People aren’t carrying around plastic loyalty cards anymore."
"Are loyalty programs better served by mobile platforms than a plastic cards? The answer is yes if consumers track points and use coupons..."

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