- November 17th, 2014
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Apple Pay: The Best Thing to Happen to Loyalty Since…
The computer maker’s Apple Pay service, which offers one-touch processing, also touches on a critical issue for merchants: the need for a long-term plan on where digital fits into an organization’s loyalty landscape. But is Apple the answer?
The technology has many financial institutions and merchants buzzing because of its security features. With each purchase, Apple Pay generates a unique code used only once and then discarded. This practice, called tokenization, eliminates the need for the consumer to produce a credit card. It also sharply reduces the value of the data to potential thieves.
The issue, for merchants, is Apple Pay also diminishes the ability to track consumer behavior. This is among the reasons why Walmart and others have dismissed Apple Pay, according to news reports.
The Apple Pay scenario exemplifies not only the importance of customer data to merchants, but the fine balance they are forced to strike today between the need for security and the need for customer data. Enter the potential for loyalty programs, which can capture consumer purchase (and non-purchase) activity through a separate unique identifier. Apple Pay can provide security, while an integrated rewards program can generate the data insights.
No sooner had I put my thoughts to paper (or screen) than Apple had put its finger on a possible solution. On Nov. 10 it announced the launch of the Barclaycard Visa with Apple Rewards credit card, offering Apple customers rewards in the form of Apple store gift cards.
No word yet on whether Apple Rewards will work with Apple Pay, but it is not unrealistic that Apple would reward users for making purchases on the iPhone. This may sound enticing for merchants that want to partner with Apple, but I don’t see how it would benefit retailers that have a loyalty scheme tied to their own credit card or as a stand-alone program. More likely, any reward element would benefit Apple.
Which leads me to believe that Apple Pay has solved only half the problem – the security issue. Tokenization may be the hottest topic in the payments circuit since chip cards, but it doesn’t resolve the issue for the overall payment industry – especially in a world that is increasingly data driven. And this leads to a key challenge for Apple: If masking the payment data means that only a portion of retailers will join Apple Pay, then it may blunt the ability of a market mover like Apple to accelerate the adoption of mobile payments.
This puts the marketer’s finger on a different issue: mobile acceptance, and just how many parties have to buy in.