Viewpoint: Riding the Rails to Bridge the Rewards-Redemption Gap

By Eric Mettemeyer, StoreFinancial

With the advancement of smartphone technology and social media, we’re witnessing a cascade of innovation around loyalty and incentive products. Market leaders are tapping into the combined power of accessible consumer profiles in social media and consumer purchase history from card transactions to deliver relevant promotions and rewards to consumers via smartphone.

Previously, consumers who opted-in likely received a deluge of not-so-relevant promotional offers through SMS messaging and smartphone app “push notifications.” To solve the relevancy issue, innovators are leveraging smartphone technology to determine the geographic location of the consumer to aid the marketer in pushing a message at a more opportune time, such as when the consumer is walking by the marketer’s retail storefront or down a store aisle where the marketer’s product is located. These technologies include cellular signal triangulation, GPS and Bluetooth low energy. To further solve the relevancy issue, innovators are combing through the purchase histories and social media profiles of consumers to provide marketers with an incredible array of data for one-to-one marketing campaigns.

While the relevancy issue is being solved in amazing, if not scary ways (who needs privacy?), there is still the problem of redemption. How does the consumer redeem the promotion or reward consistently across the retailer network? How does the retailer reconcile the rewards in their accounting records and efficiently ensure payment?

Ask and You Shall Redeem

The redemption problem is a challenge across all types of retail networks. While it may seem easier when the retailer has a single POS system across its entire retail network (online and brick and mortar), the larger retailer typically is facing an expensive and complex solution to redemption. Add in the future need to support mobile payments and the solution’s expense grows even more.  When the retail network is comprised of a disparate set of POS systems, the challenge can seem impossible. Think of retailers with corporate-owned and franchised stores, such as mobile phone dealers or gas station operators. The solution becomes not just a matter of expense, but control. And while the retail brand may not control the disparate POS systems in its retail network, the consumer is unaware of the issue. A consumer sees a brand and expects a consistent experience across that brand, regardless of the technology challenges underlying the retail network.

Lack of ownership or control of the retailer’s POS network must be overcome to provide a quality consumer experience. It’s not enough if the promotional or rewards program can be redeemed only at 10 to 50 percent of the retail brand’s POS locations.

Speaking of disparate POS systems in the retail network, I’ll never forget the first time I used a Groupon several years back. As I presented the paper coupon to the retailer, I surprisingly witnessed the clerk leaf through a massive pile of barcoded, dot matrix paper that was printed, presumably from a file sent by Groupon to the participating retailer. To my dismay, my name was not in that paper pile. The clerk then went into the back office to print the latest file, and fortunately my name had been added. Surely the experience today is better, but redemption and settlement of non-integrated rewards/coupons is still mostly an offline, manual process for marketers and retailers.

One approach that bridges the gap is to leverage the existing bankcard payment networks for seamless retailer acceptance worldwide. Certain private-label card program managers/transaction processers have developed extensive restriction capabilities on their processing platforms to limit the use of private-label bankcards to specific sets of retailers, effectively creating a closed-loop experience across an open-loop card acceptance network. In this solution, underlying the promotion or reward is a physical, virtual or decoupled debit card that is accepted like any other payment card at the retail POS. Further, the bankcard networks provide an avenue to the marketer/retailer to seamlessly transition to mobile acceptance via their support of host card emulation.

This private-label, restricted redemption approach enables a seamless redemption of the promotion or reward across a disparate set of retailer POS systems, driving spend to a specific set of retailers and automating the settlement process for marketers and participating retailers alike. The retailer reconciles and ensures payment in an automated fashion via their existing card payment processes. And the consumer is able to redeem the promotion or reward consistently across the participating retailers in the marketer’s program, regardless of the POS makeup of the retail network.

Even early adopters and big-box retailers can learn a few things about payment technology. By leveraging innovative yet underutilized payment solutions like private-label and restricted-redemption programs, they have the ability to drive higher promotion and reward redemption consistency, and narrow the gap between consumer adoption and POS system disparity.

Eric Mettemeyer joined StoreFinancial as CEO in May, bringing more than a decade of experience in the payments industry. He has managed more than 10 acquisitions of prepaid, card processing and money transfer companies in Europe and the Americas for Euronet Worldwide and subsequently served as managing director of epay Americas and Asia, a division of Euronet. Eric can be reached at [email protected].