Loyalty Not in the Cards
By John Hennessy
Biometric payment provider Pay By Touch isn’t content using its technology to speed payment for shoppers and lower transaction fees for retailers. They have ambitions to use
biometric identification to support loyalty programs.
The press release on their recent acquisition of integrated reward program supplier and business process outsourcing solutions provider Capture Resource makes this clear.
“Capture Resource’s intellectual property, customizable loyalty programs, technology and consumer-friendly kiosks bring significant value to Pay By Touch and will help continue to grow our unique loyalty offering,” said John Rogers, founder, chairman, and CEO of Pay By Touch. “Together, our companies’ complementary solutions and expertise will accelerate the growth of Pay By Touch and help our customers boost their bottom lines.”
Pay By Touch plans to offer customers interactive gift and reward programs, customized reporting, design, production and Web access services. They hope retailers find value in
advanced information capture technology, database management and other services.
Moderator’s Comment: Are consumers on overload with the number of cards they carry in their wallets or purses? Do biometric programs offer a competitive
advantage in this regard?
A card shredder and bucket for old loyalty cards.
Any retailer considering a move to biometric identification and not including the shredder and bucket is missing a chance to do some damage to loyalty and
even payment programs run by their competitors. It might even be worth offering some kind of reward for destroying a competitive card. –
John Hennessy – Moderator
I like the idea of making the card unnecessary, but in most cases, purchase patterns should be linked to the household, not the individual. Using a phone number or some other unique household identifier is easier and provides just the right amount of information. In this setting, biometrics is still just a technology searching for a solution.
I very much like the concept of biometric identification, provided that it is truly secure. Not only does it provide significant convenience for both the customer (freedom from cards) and retailer (front-end productivity), but it also has two other major potential benefits. First, it should provide significant protection against identity theft, perhaps being the ultimate solution to that pernicious problem. Another benefit that I haven’t seen discussed before is that it has the potential to actually enhance consumer privacy by enabling loyalty programs that track and analyze individual purchase behavior without any knowledge of specific customer identity. I can imagine customers being able to register for membership at an interactive kiosk by submitting a biometric identifier and probably a secret PIN, with any personally identifying information purely optional. Householding would become a problem for the retailer, the solution to which is to provide a loyalty incentive that rewards customers for self-identifying household relationships.
Race has made an important point about loyalty being the issue rather than the technology which is used to access it. Where I disagree with him is in his request to have even more discussion in this forum about how to attract that loyalty in the first place. We have discussed this repeatedly and, from what I can see based on the comments, few retailers have taken heed of our collective words of wisdom, more’s the pity.
With regard to today’s discussion, regular readers are aware of my perhaps extreme views on privacy and paranoid response to potential security breaches. Obviously those with loyalty cards or using a biometric solution do so voluntarily but it still makes me uncomfortable as I sit here wondering just how aware they really are about the ways in which the information they impart may be used. The fact that it may not be used to their detriment is often more because of retailers’ inefficiency than by intention. So few people believe that the rewards are worthwhile. Whether or not biometrics become a viable alternative to carrying cards, building loyalty should incorporate building trust and, therefore, being transparent about possible use of information rather than trying to sell convenience and discounts.
Getting rid of cards to carry: a great goal. Biometrics is only the answer when everyone trusts the solution. Every time it’s discussed, the security question gets repeated and the Play-Doh type of horror story is repeated. Additionally, to some people, taking fingerprints or handprints has an association of police-station criminal processing and Post Office Wanted posters. Every identity system security tool has its downside, since we all know that neither cards nor passwords nor biometrics are perfect. The most friendly solution may be to offer the customer a choice. And Race is right: most loyalty programs are simply discount programs or bribe programs and certainly have nothing to do with the meaning of the word loyalty.
I realize I’m digressing, but I keep thinking that like retailers, we aren’t really focusing on (what I consider to be) the most important element of this topic, which is the use and value of loyalty programs to begin with.
That point has been brought up, though glancingly in my opinion, several times in these discussions. I see SO many retailers who focus on “cool” and interesting elements of conducting business but fail quite surprisingly on the critical elements. I think our firm’s studies echo many others’ when we find that retail businesses overall meet the critical consumer expectations at a 3.25 out of 5. Basically a grade of a C.
In this context, biometrics seems to me to be almost a negative: a distraction from the bigger problems that are not being addressed. I would assume (probably incorrectly) that if we were to take a random sample of 2000 consumers across the country and ask them how important biometric loyalty programs are compared to having retailers meet their core needs, that biometrics would not be all that high.
The real question, in my view, is: what can retailers do to really build loyalty? So many seem to have a loyalty program as some kind of bribe to get consumers to shop there — yes, access to special prices is a reward, but isn’t it also a bribe at the same time?
A couple of years ago, we studied retail executives views on the issue of how they allocate their resources for business improvements. I seem to recall that something like 78% said that, in the end, they prefer to focus on non-core issues such as technology and micro-element processes, because they think that these things will improve the core elements of meeting consumer expectations. But then we asked them if they had been able to measure significant improvement in meeting expectations as a result of their efforts in these other areas, and of those who paid attention to expectations AND measured them, something like 95% said “no significant measurable improvement.”
I think retailers and those of us who support them can get lost in these interesting details and lose sight of the bigger picture. Rick and Al, and all of the participants here: could we some day have an in-depth discussion on this, on what retailers can do to REALLY build loyalty? Maybe we already have. I would so much like to see a discussion on these more core elements of retail.
I have to confess, I never thought consumer-facing Biometrics would catch on as quickly as it has. Pay By Touch certainly has proven me wrong thus far, and BioPay had an interesting angle, which only adds to Pay By Touch’s portfolio.
Nikki raises an interesting point about making sure that one retailer doesn’t necessarily find out about my other loyalty cards. BioPay has to build that intelligence into its app, as well as respect my complete privacy – that is, please do not give any other information besides my payment to the retailer.
Consumers will only embrace these various and sundry technologies when they can opt in or opt out at their whim.
Sure, I’d love to reduce the weight of my purse by getting rid of cards. Of course, I don’t have all that many loyalty cards in the first place, but I wouldn’t even mind not carrying credit cards around!
Personally, I am a fan of biometrics. I like the idea of the ease of use – a truer accelerator of the payment process than contactless payment, which still requires getting the card out (and carrying it around with you), and a card agnostic solution, so that retailers don’t need a reader each for Mastercard, Chase, American Express, and anyone else who decides to be contactless.
But retailers need to make sure that consumers benefit from having one meta-account to manage all of their loyalty programs and payment options, rather than trying to make it a closed system to that retailer – and Pay By Touch needs to make sure that consumers feel confident that none of their other loyalty program or payment choices are made visible to retailers – I don’t think Kroger needs to know about my Safeway loyalty card.
But we also need to hurry up and get to the tipping point. As a consumer, it’s really only beneficial to me if I don’t have to carry any cards, which means a much more widespread adoption by retailers – who have a hard time justifying the implementation if there are not a lot of their customers who participate.
What’s missing, or what’s preventing, more widespread adoption? The business case seems pretty clear. Was it just the loyalty component? Is it consumer resistance – a lack of understanding of how the technology works? Security concerns? I don’t know – but I hope Pay By Touch figures it out soon, because I know I’m ready to shred the dozen loyalty cards in my own wallet.
Digging through purses and wallets for loyalty cards at the register is a bit cumbersome for consumers. I think loyalty programs are part of the natural progression for biometric payment but consumer’s security concerns in this regard must be addressed by retailers immediately. There is still some hesitation for trusting and embracing this form of payment.
I recently read an article detailing research done at Clarkson University on the security of biometric payments. The reported results were somewhat alarming. Researchers fooled biometric systems with fingerprints made out of Play-Doh nine out of ten times. Cadaver fingers passed 94 percent of the time. This does demonstrate the vulnerability of the system. Certainly information such as this will not ease consumer concerns
Retailers must address consumers concerns about 1)the security of the system and 2)what the company will or will not do with their personal information when they sign up for a loyalty program. With that said, I do believe it is just a matter of time before this technology is widespread and includes loyalty programs.
The addition of biometrics to the loyalty mix simply adds to the implementation cost and time and is a ‘trojan horse’ by Pay By Touch to offer their ACH banking solution and bypass existing payment processors and credit/debit cards.
If a retailer is satisfied with their current payment processing relationship, seeks to reduce interchange fees and wants to add/improve loyalty, you don’t need to have physical loyalty cards.
In the shameless plug department, my firm offers the above via a registered credit or debit card solution (i.e. using the shopper’s existing cards in her wallet as the token) or when integrated to the user’s checking/ACH account via one of our banking partners. It’s easy, the shopper still gets their points from the national program and we integrated CRM as a part of the solution.
The biometrics as a security measure is a nice to have but introduces it’s own suite of security issues, extra IT costs and the enrollment process is quite awkward.
There are many good points raised in this discussion, and I agree that the biometric payment options are really cool. Let’s look at the core of this discussion again: loyalty. At the risk of beating a dead horse, why on earth should a card or fingerprint be used to create loyalty? How about taking care of the customer and making a priority of insuring they never want to shop anywhere else?
I think loyalty cards make it too easy to level the playing field down to “average” service, and turn the attention on to gimmicks. Ultimately, you will wind up with customers cherry picking the deals. So, in effect, they are not really loyal to the merchant, only the best offer(s) they can provide. We know that customers are shopping at more retailers now than in years past for their needs, and I think this is a major reason why. They are running around town for each little deal of the week.
So, the payment options are a good idea in my mind, but I doubt I am alone in stating that we could improve the customer experience by simply focusing on them instead of all the so called “loyalty” offers. Getting customers in the door is half the battle, but it sounds like we’re becoming focused on only 50% satisfaction with these programs…