Traditional banks and card issuers are scrambling to evolve, and one thing is clear. Disruptors are using mobile to make consumers’ buying experience easy, simple and convenient. In effect, phones are beginning to replace our physical wallets. So will smartphone-only shopping and mobile-only banking become the future of the payments industry?
In terms of mobile-only banking, that depends on whether regulators will allow fintech firms to provide the full spectrum of services that traditional banks already provide. That seems unlikely, at least in the near-term. While that roadblock exists (for competing startups), traditional financial institutions can’t rest on their laurels. So it’d be prudent for banks to have a sense of urgency when it comes to delivering their services and card rewards through the platforms that consumers are now using.
Smartphone-only shopping is definitely here, however, and experts predict that mobile wallet technology will see record use during the 2016 holiday season. More innovative banks such as Capital One and Wells Fargo are offering payment apps that allow customers to pay online and at POS registers simply by swiping or tapping their devices. Capital One’s version, Wallet, lets you store your receipt (by snapping photos), receive instant purchase notifications, lock your card if it gets lost or stolen, and digitize multiple gift cards, among other features.
But these apps are also making it easier for cardholders to accumulate and redeem their card rewards, such as miles, cash back, discounts and other points. It’s a key strategic move for businesses to make their rewards programs more convenient through smartphones when you consider that such enticements attract and keep millions of customers. If you’re a company and you have wonderful offers, would it matter if less and less people are taking advantage of them? As they say in the digital world, it’s all about traffic and conversions.
A Dec. 2016 survey commissioned by Capital One finds that 60 percent of millennials say they are not sure they are making the most of the rewards they earned, and 19 percent say they feel they are taking advantage of only a handful of their card’s features and benefits. In the industry, there’s a gap between the card rewards that cardholders can redeem versus their understanding of the benefits that they’re eligible for. And this is where mobile can solve this problem. As payment technologies continue to develop, card issuers can provide better apps that completely integrate mobile apps with their rewards programs and partner offers.
Imagine riding an Uber car and, with a tap of your phone, your bill automatically gets adjusted to reflect a discount that’s currently being offered through your bank or airline. Or checking in at the airline counter and, with your mobile payment, you get a complimentary upgrade to business class because of your AAA membership. Sure seems like the future of phone-based payments.
These may involve technical hurdles, but there are significant implications for banks — or disruptors — who can offer better buying experiences. The younger crowd would rather swipe and tap and not be burdened by less efficient transactions. This applies to rewards programs, which can be difficult to redeem (such as in the travel industry) because of legacy processes and systems that have taken a backseat to management’s pursuit of quarterly earnings. Short-sightedness has often prevented transformative change.
According to the same survey, over half of millennials (54 percent) used their rewards for airplane tickets for themselves, and nearly one-quarter (23 percent) used their rewards for ride-share services like Uber and hotel discounts. Rewards cards like Capital One’s Quicksilver are partnering with Uber. As of November 1, customers get $15 in Uber credits every time customers pay for 9 rides with a Quicksilver card through March 31, 2017.
Our smartphones are our portable computers, and these devices are helping us achieve a more convenient shopping experience. It’s time for banks and companies to improve their mobile offerings or risk facing massive disruption.
This post is part of our contributor series. It is written and published independently of TNW.
This post is part of our contributor series. The views expressed are the author's own and not necessarily shared by TNW.
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