Viewpoint: Loyalty, Not Payments, Is the Real Mobile Opportunity (Spring 2013)

Written by FinTech Futures
13th May 2013

By Jai Holtz, Sears Financial Services (Member of MCX)

There’s no denying that years of hype around mobile payments is beginning to translate into real interest and action from retailers, but the trend has a lot less to do with the actual act of paying than is widely assumed.

There are numerous benefits to being able to pay with a smartphone, including faster transactions, shorter lines and electronic receipts, but at Sears Holdings we believe loyalty and offers will play the largest role in convincing consumers to adopt mobile wallets and retailers to accept them.

Mobile commerce, in our view, holds the potential to transform shopping and paying in ways that provide a dramatically better experience for customers and merchants alike. But that transformation won’t come from merely replacing a payment card with a phone.

It sounds counterintuitive, but the primary benefit of the shift to mobile payments is not improved payments, although that is an advantage. The true value proposition is the ability to dramatically enhance the offer and loyalty programs that help retailers better serve their customers. This is going to create compelling offers for customers and develop stronger customer relationships for retailers.

At Sears and Kmart, we introduced our Shop Your Way rewards program in 2008, and today the members account for a significant portion of our sales. The program gives members compelling benefits and conveniences, like no-receipt returns, guaranteed pickup in five minutes and personalized deals. And it has helped us to get to know—and to serve— our best customers even better.

Mobile commerce offers the potential to increase the potency of Shop Your Way by giving us the ability to gather more information about rewards program members and interact with them on their way into the store, while shopping and at checkout.

And the richer data we gather about their in-store habits will help us craft more relevant offers, which will lead to more sales. (A timeline for implementing mobile commerce hasn’t been made public.)

To us, that customer data is the single-most exciting thing about mobile, and we suspect the relevant offers will be among the most exciting things for our rewards program members, too. That’s why we’re puzzled by some other emerging business models in the category, which are built around sharing that valuable data with competitors, so they can make offers to those same customers.

It’s also why we’ve opted to join the Merchant Customer Exchange (MCX), a mobile-wallet offering backed by a range of leading merchants in the big-box, convenience, drug, fuel, grocery, restaurant and specialty-retail categories.

To us, the appeal of MCX is that it’s based on a belief that transaction data should stay between the merchant and the customer. Our Shop Your Way members are our most important customers, and the last thing we want is to have our competitors using the data from member transactions with us to lure their business elsewhere.

Mobile commerce should grow our relationships with our best customers, not put those relationships at risk.

Jai Holtz is vice president/general manager for Sears Financial Services, a member of MCX. Sears Financial Services serves more than 40 million loyal shopper households across Sears Full Line Stores, Kmart, Lands’ End, Sears Home Services and Sears Commercial. Holtz leads the company’s efforts to provide innovative payment and credit solutions. For more information, email [email protected].

In Viewpoints, prepaid and emerging payment professionals share their perspectives on the industry. Paybefore endeavors to present many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.