Increased digital wallet adoption, more competitive credit card offers and the wider availability of e-commerce tender types have culminated in a raging battle for the number one spot.
How can financial institutions (FIs) and card issuers stay competitive while being the primary payment choice for consumers? Nowadays, it’s all about the value-add of a payment type that makes it the top wallet choice.
Our latest guest post is guided by Wildfire Systems‘ chief revenue officer, Shawn Conahan.
Wildfire is a white-label loyalty, rewards and cashback platform seeking to allow FIs to integrate wider consumer value into their payment systems.
Conahan develops strategic partnerships with various finance, banking and fintech companies for the platform. His position enables the creation of new revenue streams and modernises FI customer experiences to position them competitively for the future of banking and money.
He has been an entrepreneur, senior executive and investor in the wireless, technology and Internet industries for over 15 years. His industry experience includes digital media, wireless technology and big data where the common thread has been building platforms with broad applicability.
Here, Conahan discusses the application of rewards schemes within payment systems, and the positive experiences this combination generates:
Today, consumers have more ways to pay for things online than ever before. Options like PayPal, Venmo, ApplePay, Affirm and Klarna have become commonplace within online checkouts.
Alternatively, they can use their debit or credit card. Or, there’s also the option to pay via gift card or store credit. And of course, these are in addition to a lease-to-own option offered by many merchants.
There is a battle for primacy among payment options, with many surfacing on product pages ahead of the cart. This means a user never even has a chance to enter their credit/debit card’s primary account number (PAN).
At the same time, consumers are moving increasingly toward digital wallet-based payment options due to their simplicity. ApplePay processed $6trillion in payments last year, surpassing Mastercard.
The advantage to consumers is that their spending power is now disembodied from any physical tender. There is now a single point of contact, like a smartphone, to access large stores of buying power.
The result is a levelling of the playing field among payment options in the minds of consumers. ‘Money’ has become an abstract concept. It represents a collection of actual wealth combined with various lines of credit, which lives in a nebulous ‘cloud’ somewhere.
The availability of point-of-sale phone taps and e-commerce clicks is allowing consumers to conjure up their ‘money’ at any time.
So how does a card issuer or bank differentiate its payment options? And additionally, how can they compete for primacy in a sea of consumer choice?
This comes when the focus remains on the consumer and their desire for value and simplicity. Although simple, achieving the reality isn’t so easy.
When it comes to payment options, the highest value option with the lowest friction (e.g., the most simplicity) is always going to win.
Here is how to achieve both:
Focus on value
When times are good, people don’t mind saving money. But when times are tight, they actively seek out ways to save money.
During economic anxiety, helping customers to extend their budgets is a winning strategy that drives loyalty and purchase volume.
Cash-back rewards and coupons aren’t just nice-to-have features anymore. For a payment tender’s value proposition, they’re table stakes.
Consumers expect rewards, and they are coming to expect them from their payment provider. In fact, a recent LendingTree survey found that 50 per cent of consumers feel that loyalty programmes are more important than ever.
Furthermore, 75 per cent of consumers joined to receive rewards for spending while 66 per cent joined to access discounts.
Thus, rewarding consumers with cash-back on their purchases, and with coupons that can save the average consumer hundreds of dollars per year, is the ultimate addition to an FI’s value prop. These rewards will keep its payment option at the top of consumers’ minds.
Not only that, but shopping rewards typically also stack on top of whatever additional value consumers may be provided from the FI via a cut of interchange fees.
Focus on simplicity
Consumers are overwhelmed by e-commerce payment options, many integrated into merchants’ websites before they ever get to the checkout page. Thus, the best strategy is to move upfunnel to achieve payment tender primacy – which has the added benefit of providing the consumer with the simplest payment option of all.
One way for an FI to do this is to offer a tool that does the following:
- Enables customers to activate cash-back and coupons as they shop online
- Gives them a one-click checkout that auto-fills their PAN
With this method, the first thing consumers see when they land on a merchant’s website is the FI’s branded tool, on top of all other payment options, reminding them they are receiving cash back for shopping when they use the FI’s payment method.
Then, when it is time to pay, a single click fills in their pre-stored payment information. The result is a delighted customer and a durably loyal relationship built on value and simplicity.
Cashback and coupons are the fastest-growing loyalty product among financial institutions including banks, issuers, and payment providers, and the most adopted mechanism to deliver it is the humble browser extension.
These tools have been popularised by large industry players like Capital One Shopping and PayPal’s $4billion acquisition of Honey.
Both of these have driven awareness among consumers, and with this awareness plus the uncertain economic environment, cashback and coupons are in high demand.