NEW ORLEANS -- If a mobile solution doesn’t keep customers coming back to the retailer—and even worse, if it ends up simply costing the merchant money—why implement it?
Payments experts debated these questions Monday at the NACHA Payments 2015 conference. With the advent of Apple Pay and looming competitors like Samsung Pay and the Merchant Customer Exchange (MCX)’s CurrentC wallet, more merchants are adopting mobile wallets. However, retail treasurers should consider two key points:
1. Apple Pay could hinder customer engagement.
James Ward, vice president of credit for Belk Department Stores, stressed that his company’s primary concern is driving customers to its stores. “When I think about mobile payments and what that entails for a retailer, the first thing we ask is how we get the customer engaged in our brand,” he said.
Should retailers get on board with solutions like Apple Pay, they may ultimately be giving up their ability to engage with their customers. One technology vendor commented that his retail clients are “up in arms” over Apple Pay’s tokenization because it essentially takes away their opportunity to recognize customers at the point of sale. “It really does come between the customer and the data,” he said.
Heidi Liebenguth, consulting partner for Crone Consulting LLC, agreed. “There are some hurdles with Apple Pay; you don’t really get to see the customer in the same way you see them now,” she said. Although tokenization does indeed help to keep retail customers’ personal data from being transferred during the transaction, it also keeps the retailers from learning more about their customers.
2. Apple Pay could cannibalize retailers’ loyalty program efforts.
Ward believes that for a mobile solution to be worthwhile at Belk, it would have to be able to incorporate the merchant’s rewards card program, which gives customers access to reward dollars, special financing and other benefits. Currently, Apple Pay does not incorporate retailers’ private label cards.
Reward card usage, Ward noted, drives Belk’s sales and profitability. “From a merchant’s point of view, I’m interested in wallets that can drive sales,” he said. “When I take a payment from a third-party card or a debit card we’re paying anywhere from 100 bps to 300 bps. If I get that customer to take my private label credit card, instead of paying, I’m making money.”
Anand Goel, CEO of Optimized Payments Consulting, said retailers with strong loyalty programs may ultimately want to steer clear of services like Apple Pay until it includes private label cards. “If I’m Belk and 50 percent of my transactions are private label, and I introduce Apple Pay, I am cannibalizing some of my own private label sales that would have gone to my card—with no interchange cost and more data,” he told AFP.
As of now, it may not make much sense for retailers with substantial private label card volume to adopt Apple Pay, Goel added. There can be some exceptions of course, such as a high-end retailer whose customers are primarily iPhone users and a lot of them begin requesting Apple Pay. “But for a typical retailer, I could see why they would hold off for a while,” he said.