Merchants have been eager to capitalize on the growing popularity of smart phones by sending discount offers to on-the-go consumers. Until now, however, redemption was not easy; coupons received on a phone typically had to be redeemed via the phone itself. And large retailers, for the most part, could not accept mobile coupons at the point of sale unless they had new scanners or had trained their employees to enter promotional codes on cash registers, said Paul Harkins, the chairman and chief executive of OfferIQ.
To facilitate mobile-coupon redemption, Harkins' company, among a handful of others, has developed a system that lets people enroll their payment cards in merchants' rewards programs. When an offer shows up on their phone, users can cash in just by swiping their cards.
Harkins said this approach could boost the use of mobile coupons by both merchants and consumers and will appeal to banks as well because it can increase transaction volume. There is a "huge opportunity to tie incentives to a particular payment method that someone already has in their wallet," he said.
The New York start-up, a division of Astorenearme Inc., is the latest to jump into the mobile-coupon fray, where numerous companies are jockeying for business from loyalty rewards providers, banks and retailers.
OfferIQ is not the only company employing a card-centric strategy for merchant rewards. RocketBux Inc., a Bend, Ore., developer of mobile-marketing technology, has a similar program, and Visa Inc. offers the same capability, though few companies are using it now.
Red Gillen, a senior analyst at the banking research firm Celent, said the approach could attract an array of retailers because it eliminates some of the work they must do on the front end.
"The idea of the employee taking the payment card from the customer, swiping as they do anyway — I think there's a lot of traction in that," he said.
Merchants might be interested in a system that could increase sales without requiring any new hardware at the point of sale.
"Right now the banks are under a lot of pressure to increase the profitability or maintain the profitability of their card programs," Gillen said. "That's always a wonderful thing" if no technology upgrades are required.
Under OfferIQ's program, a sandwich shop, for example, could enter an offer for $2 off a purchase of $10 or more into the company's system.
Customers who have opted in to receive offers from that merchant get a message when their phones' built-in global positioning system technology determines they are in the retailer's neighborhood. (Customers whose phones lack GPS would get daily e-mails with various offers.)
The offer would be redeemed when the customer swipes the enrolled card, and the discounts would appear as credits on the monthly card statement.
"The actual cash-register personnel don't really even know it exists," Harkins said. OfferIQ's technology does all the tracking to ensure the requirements are met for specific discounts. "We're seeing the transaction occur on the back end."
Harkins said a major merchant processor, which he would not name, has agreed to offer his company's system to its merchant clients.
OfferIQ addresses some of the challenges merchants and consumers encounter when accepting and redeeming mobile coupons, payments experts said. It still faces an uphill battle, though, in carving out a niche in the burgeoning mobile-coupon realm.
