Marketing technology vendors are helping issuers pump up their transaction volume by transferring mobile-coupon redemption to a debit or credit card.

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.

Competition from other, smaller tech providers like RocketBux and payments giants like Visa could make it hard for OfferIQ's system to stand out.

Landing customers "is time-consuming, especially if you're a small company," Gillen said. "The credibility factor is an issue."

Visa offers merchants the ability to offer coupons redeemable via card-swiping as part of its Visa Mobile application, rolled out in 2008 for phones using Google Inc.'s Android operating system.

Currently no merchants that participate in Visa Mobile are using that strategy; instead, they send redemption codes to cardholders' phones, said Prakash Hariramani, a senior business leader in Visa's global mobile initiative. Visa does have merchants that offer coupons and rewards as a statement credit under other programs that do not involve mobile phones, for example, its SavingsEdge program for business card holders, he said.

Using mobile coupons linked to cards, for example, a coffee shop could offer discounts for spending a certain amount.

"Once you enroll in the program, all you do is walk in and buy a coffee and automatically get a $2 credit on your next Visa card billing statement," Hariramani said. "There are many merchants who say, 'I don't want my cashier at the point of sale' " dealing with mobile coupons.

To offer coupons through the Visa Mobile platform, issuers must agree to participate; U.S. Bancorp is the only banking company that offers it to cardholders, but Hariramani said Visa is "soliciting other clients."

RocketBux works with retailers that accept mobile bar codes and those that tie discounts to customers' cards.

"A lot of these schemes have been tried and have failed when they incorporate hardware or they incorporate some new technique that has to be bought or employees have to be educated," said RocketBux President Fred Boos. "There's a reluctance to invest in the technology if that technology might be leapfrogged quickly."

Mobile-coupon programs are gaining traction at major retailers, but the bar code versions seem to be catching on first.

Target Corp. and J.C. Penney Co. Inc. are both moving forward with mobile-coupon programs that use bar codes.

J.C. Penney in September announced it was working with the San Jose mobile-technology provider Cellfire Inc. to test 2D bar code coupons at 16 stores in the Houston area.

Customers register through Cellfire to receive coupons on their phone and redeem them by having them scanned at the stores' registers.

In March J.C. Penney rolled out the program nationally, but it only has scanners that can read the bar codes in its Houston stores, a company representative wrote in an e-mail. Cashiers at other sites can manually enter the coupon code using a "hot key" on the register.

"Our goal is to reduce the friction as much as possible" for retailers that accept mobile coupons, said Paul Stanley, director of marketing at Cellfire.

Target announced in March a similar mobile-coupon initiative for all its stores.

The Minneapolis retailer already had point of sale scanners that could read digital bar codes, making it possible to roll out the program nationwide, spokeswoman Leah Guimond said.

She would not discuss the costs associated with the program but said Target decided to move forward after a pilot test in 28 stores last July that was "pretty popular." Target uses the same bar code system to let people gain access to gift card balances.

Stanley said he sees some limitations to tying discounts to credit and debit cards, notably that this forces people to use their cards to redeem an offer.

Harkins dismissed the idea that shoppers would be forced into using their cards; swiping a debit card is analogous to paying cash, he said.

"It's all about rewards, ultimately," according to Harkins. "If you think about the complication in most rewards programs, you're getting points and have to go to a Web site to redeem. This is cash, and cash back is always easier to deal with."

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