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In case you missed it, there was an interesting piece in the January/February issue of Transaction Trends, the Electronic Transactions Association’s official publication.  I highly recommend it, as it was a good look ahead.  The feature, “Putting the ‘L’ in M-Commerce” was an interview with several prominent industry executives about loyalty cards and programs.

Today, however, loyalty card programs are fragmented, to put it politely.  Many retailers have programs, varying from the very low tech (think buy-10-get-1-free punch cards) to the very high-tech & complex (how many airlines miles do I get with each purchase?).  Customers tend to use cards, if at all, only for their top few top retailers.  As a result, a host of different strategies are coming to market to try to capitalize on this problem.

Retailer Specific Apps (the One Size Fits One Approach)

Subway and Starbucks, to name two large retailers, have recently garnered positive media attention from their mobile loyalty platforms.  Forbes had an excellent write-up on the Starbucks program this weekend.  The advantage to these apps are obvious, the retailer has total control over the loyalty experience, and the brand is front and center.   On my Starbucks App, I can order coffee.  On my Subway App I can order a sandwich.  Of course, customers visit a large number of retailers, and are hardly interested in downloading and configuring a large number of apps (how many different times have I had to enter my name and address?).

Belly (the One Size Fits Some Approach)

Belly tries to solve this problem by creating one app that works for all of its retailers.  Moblized posted a good review for Belly a few weeks ago.  The result is a user experience that is familiar to the user, but not particularly customizable for the retailer.  Also, the retailer needs to have Belly point-of-sale equipment.  Combine these retailer side problems, with the fact that Belly faces a classic network effect predicament, and belly faces some real challenges.  (Also, it doesn’t help that a search for “Belly” in the Apple App Store reveals about 10 weight loss apps before the Belly app).

Loop (the One Size Fits All Approach)

Personally, I am excited to try Loop.   The Verge took a look at the company last week.  The advantages are obvious.  It works on current technology, all of your information is stored on one app, and the user is not required to enter the same information (e.g. name, email) multiple times.  However, the $39 price tag  the consumer must pay, combined with the less than ideal form factor (a FOB that must be kept with you) will likely keep many potential users away.  Another issue is that the cards have to be magnetic.   That’s maybe 3/4 of the loyalty cards I have, but sadly it’s no solution for the small-merchant’s ubiquitous punch-card.  Also, once EMV adoption takes off, where a chip is required in order to complete a credit card transaction, Loop has a potentially fatal issue on its hands.

For Entrepreneurs

There are dozens of other interesting products in the space as well.  For entrepreneurs looking to get into the space, and create (and cash in on) the WhatsApp? of loyalty cards, it is important to not only get help on setting up and structuring your business (as is true of any new venture), but also in understanding the Payments Industry.  As noted in the Transaction Trends article by Jeff Mankoff, founder and chief executive officer of vPromos Inc., and ETA Technology committee Member, “the key [is] being able to provide something that gives merchants multiple ways of generating new customers, and helps merchants drive revenue from  existing ones in a simple, affordable way”

Josh Rosenblatt (@JoshSRosenblatt) is an attorney in the Electronic Payments Group at Waller Lansden Dortch & Davis, LLP. 

 

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