Can Punchh fix 'broken' restaurant loyalty with Apple Pay and NFC?

One of the biggest goals of mobile payments has been connecting the consumer transaction with a store’s loyalty program to leverage data for customized offers, but many quick-service restaurants have struggled to make that happen.

Mobile marketing specialists like LevelUp and Punchh are making headway by linking purchase data from transactions with loyalty and rewards programs, but the two companies are split on how they use Near Field Communications-powered mobile payments, underscoring an ongoing dilemma.

Punchh is betting that NFC—still not widely available at most merchant locations years after its introduction—will eventually become ubiquitous, and it hopes to get an edge with clients with a direct connection to Apple Pay, enabling consumers who pay via NFC in stores to simultaneously earn and redeem restaurant loyalty program points.

Chris Ratcliffe/Bloomberg

Walgreens customers have been able to earn loyalty points using Apple Pay since 2015, and last year Kohl’s enabled its app users to earn points when paying with Apple Pay, but Punchh is an early mover in the restaurant industry, said Shyam Rao, Punchh’s CEO.

“Restaurant loyalty has been broken for a long time, but now a customer can walk into a restaurant, pay with Apple Pay and simultaneously get loyalty points and offers on the spot, creating a smooth, multi-channel loyalty experience for customers paying online, in-app or in stores,” Rao said.

Punchh plans to add Android Pay to its restaurant loyalty platform and is currently in discussions with Google about enabling its NFC payment service by the end of the year, the company said.

LevelUp hasn’t been as enthusiastic about NFC so far. The Boston-based company emphasizes in-app payments, and its platform drives consumers at participating restaurants to link their card for payment online or inside the app in stores or when ordering ahead. Consumers can also choose Chase Pay.

Though LevelUp “future-proofed” its service by including Near Field Communication payments capabilities into its solution, the company still sees relatively little demand for NFC payments, according to Alex Shuck, the company’s director of marketing and analytics.

But LevelUp is keeping its options open in case NFC takes off. In a blog post this month, LevelUp announced a beta test of “omnichannel support” for Apple Pay, describing a one-touch approach to pay with NFC and earn loyalty points available to some merchants.

Punchh spent months testing its integrated Apple Pay approach with merchants, and chains including Smashburger, Quiznos and MOD Pizza plan to launch it later this year, according to Rao. Several of Punchh’s 85 other restaurants are considering adding the integrated Apple Pay approach, but not all will do so, he concedes.

“A lot of restaurants just don’t have the NFC hardware enabled yet, but we think they will get there eventually,” Rao said.

For customers at restaurants using Punchh’s platform with the new Apple Pay approach, those who already have the restaurant’s app will be prompted to pay via Apple Pay through the wallet, simultaneously earning loyalty points with options to redeem offers. New customers will receive a screen prompt within Apple Pay to join the loyalty program directly, according to Rao.

Some observers are skeptical about whether NFC alone will make much of a difference for restaurants’ bottom lines.

Integrating NFC with loyalty may streamline the customer experience, but it won’t necessarily drive more volume, said Richard Crone, president of Crone Consulting LLC. “The biggest business driver for restaurants right now is order-ahead, and whatever in-app or mobile payments solution combines that most effectively with loyalty will win,” Crone said.