Mobile marketing, group coupons and merchant-funded rewards programs are providing new ways for merchant acquirers to help retailers increase consumer spending and traffic.
Most acquirers have "always been on the passive side when it comes to merchants," said Adil Moussa, an analyst at the Aite Group LLC research firm in Boston.
In today's economy, acquirers should not "wait until the consumer shows up. They should be more active in driving the consumer to the merchant," he said.
Mobile-based marketing enables merchants to send consumers coupons and discount notifications via SMS text messages. It also enables consumers to specify the types of deals they would prefer to receive, Moussa wrote in the recent report, "Merchant Acquiring Opportunities: Focusing on the Merchant's Clients."
The approach is gaining traction in the industry with companies such as Mocapay Inc. offering services that let merchants send deals to consumers via their mobile phones, according to the report.
More merchants are also adopting mobile couponing while they wait for near-field communication technology to enter the market, according to the report. NFC supports two-way communication with other NFC chips, enabling users to download coupons, discounts and rewards at the point of sale.
For card issuers looking to provide reward programs without increasing operational costs, merchant-funded rewards are becoming more popular. Third-party loyalty companies negotiate deals with merchants that issuers offer to their cardholders.
Recently, several third-party loyalty companies have started online merchant-funded statement rewards that let consumers receive discounts on purchases when using the issuing banks' credit, debit or prepaid cards.
BillShrink Inc. in November launched an online statement-rewards program that enables consumers to earn rewards, discounts and comparative pricing based on their purchase histories.
Cardlytics Inc. has a similar online-statement rewards program.
About 22% of new customers and 78% of repeat customers in the U.S. take advantage of offers they receive from merchant-funded rewards providers, according to Moussa's report.
Such programs generate $36.7 billion in revenue per year for merchants from new and repeat customers, while they generate $806 million annually in issuer and acquirer transaction revenue, the report said.
For merchants looking to increase their customer base, offering online group coupons may be a viable strategy, Moussa wrote.To purchase group coupons, consumers sign up for free via a specific online-couponing service's website such as Groupon Inc. or LivingSocial. Once they complete the initial registration, consumers begin to receive offers to purchase different deals each day.
Most deals include a substantial discount, such as $40 worth of food for $20 at a specific restaurant. Groupon buys the coupon from the merchant, collects the money from the consumers and splits the total purchase amount with the merchant, Moussa wrote.
Merchants face several challenges in benefiting from group coupons because they are new, including not attracting enough consumer traffic or generating a large enough return on investment.