A Surprising MVP for Mobile Payment Success

The “wallet wars” are in full swing as mobile payment providers battle for consumer attention. However, we are still waiting for a tipping point to see widespread adoption, as my colleague, Fred Martinent, pointed out in his recent blog post.

Like any new technology, it takes time for consumers to get comfortable with change and for new technology to ramp up from early adopters to mainstream users.

So what’s fueling the adoption of mobile payments?  The answer may surprise you.  Hint: it’s not security or convenience, although these are paramount to the success of mobile payments.  There is another feature that often gets users “hooked.”

A challenge to widespread adoption may be that we (consumers) are creatures of habit.  As this recent Forbes article by Steve Faktor points out, it can be difficult to get people to change their comfortable buying habits, even for a better, faster, more secure technology. Mobile payment providers are consequently facing a timeless question from consumers: What’s in it for me?

The answer may be loyalty programs; consumers are willing and eager to adopt a new payment method when there’s a free gift on the line.

Mobile payment providers are keenly aware of this trend and are using it to fuel enthusiasm for payment apps.  Starbucks, for instance, entices customers with the reward of a free drink with frequent use of the mobile app.  As of mid-2012, their customers had made over 45 million mobile payments, and mobile transactions now average about 1 million per week.

The Isis mobile wallet app, which holds digital versions credit and loyalty cards, is another prime example of how loyalty programs are being utilized in the mobile payments industry. Among other rewards, Isis tracks users’ vending machine purchases and makes their fifth purchase using the mobile wallet completely free.

Merchants love loyalty programs because they not only drive consumers to change their payment behavior, but they can have lasting effects on shopping habits. When customers receive free gifts, discounts, or better service, they feel more connected to the company.  Representing many top retailers, perhaps no one understands consumer behavior and loyalty offers better than the new Merchant Customer Exchange (MCX), which includes Walmart, Target, Best Buy, and many more retail giants.  MCX, too, has indicated that loyalty and mobile marketing offers will be part of their mobile wallet.

You may have noticed that many of your favorite establishments, especially chain stores and restaurants, now offer mobile loyalty programs and incentives to consumers.  With all of the benefits to consumers and merchants alike, it’s no wonder that loyalty rewards are playing such a key role in the ongoing wallet wars.

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