One of mobile payments’ lures for merchants may be the opportunity to deliver coupons, rewards and other customized marketing offers directly to consumers through mobile handsets at the point of sale. Wireless phones enabled with two-way Near Field Communication technology could ignite such marketing opportunities, experts believe.
NFC, however, has yet to emerge on the open market, and data on how consumers would respond to marketing offers delivered using it and other mobile channels remain scanty. But that is not stopping an assortment of merchants, payment companies and mobile-marketing startups from testing the waters and establishing early alliances that may pave the way for broad mobile marketing efforts.
Mobile-couponing experiments so far include NFC pilots and mobile prepaid gift cards with coupon options. These tests may provide early insights into how consumers may react to mobile coupons and how merchants may benefit.
Target Corp. in March announced it is delivering coupons to customers’ mobile phones. Customers may enroll to receive coupons online or via text message, and Target delivers links to coupons wirelessly through a mobile phone’s Web browser. The system generates barcode images on mobile handset screens that clerks can scan at the point of sale.
“A growing number of larger merchants are showing interest in mobile couponing,” Dom Morea, senior vice president and division manager for mobile commerce solutions at First Data Corp., tells PaymentsSource, declining to name other merchants exploring mobile couponing.
Mobile payments may add “numerous new dimensions” to loyalty marketing, although it is too soon to tell what shape the business models will take, notes Kelly Hlavinka, a partner with Alliance Data Systems Corp.’s loyalty marketing consulting firm Colloquy. “The idea that people can whip out their cell phone to capture a discount instead of rifling through their wallet for all their club and store-membership cards would be a huge step forward for loyalty marketing,” she says.
A large NFC pilot launched last year in India incorporated coupons into mobile-payment technologies. Although the coupon test was narrow, the experience helped participants explore how NFC coupons eventually might function at the point of sale (see sidebar below).
Though most merchants may have to wait two or more years for the arrival of full NFC couponing capabilities (that is, if wireless manufacturers, payment companies and handset makers can agree on a workable NFC business model), some potential participants already are lining up partnerships for NFC couponing.
One example is a deal inked in February between NFC technology provider Gemalto NV and HighCo, a provider of online and traditional couponing, sampling and promotional programs owned by London-based international marketing conglomerate WPP PLC. The partnership’s eventual goal is to enable consumers to collect and redeem coupons from NFC phones, replacing conventional paper coupons, Gemalto says.
Consumers would use their NFC mobile handsets to search for coupons on France-based HighCo’s online server, then download them over the air to the phone’s SIM card. At the point of sale, Gemalto’s technology automatically would locate the stored coupon and redeem it when the consumer waves his NFC phone near a contactless-payment terminal.
Although no marketers have yet announced NFC couponing programs, Rémi De Fouchier, Gemalto senior vice president of trusted services management, said in a statement the mobile-couponing element “perfectly complements” the company’s existing NFC services being tested for payment and transport.
Fertile Ground
In the U.S., a few new companies are experimenting with mobile coupons redeemable at the point of sale through consumers’ mobile handsets and delivered in conjunction with proprietary prepaid gift cards. Although these efforts are fairly confined, payments analysts view them as a potentially fertile testing ground for the day when higher-tech mobile payments that might include discount offers are more widely available.
“Retailers experimenting now with some of the pre-NFC approaches to mobile marketing and loyalty, even with mobile gift cards, will likely have a strategic advantage over competitors, at the very least in getting a sense of what types of things motivate consumers through mobile channels and seeding interest in it,” Morea says.
Mocapay Inc., a Denver-based mobile payment and marketing company, in February unveiled a platform enabling merchants to give customers a one-time authorization code to conduct point-of-sale payments from prepaid accounts using mobile handsets.
“We have embedded a messaging engine into the transaction platform so that merchants can communicate with consumers immediately before, during and after they initiate a mobile gift card transaction, which could include coupons, discounts and loyalty program offers,” says Kevin Grieve, Mocapay CEO.
To conduct a transaction, consumers open the Mocapay application on their mobile phone and request to make a payment through a participating merchant. If funds are available, Mocapay immediately sends a one-time-use, six-digit code to the consumer’s handset, which the consumer gives to the clerk to complete the sale.
Merchant Interest
For security purposes, Mocapay’s one-time codes expire 30 minutes after Mocapay issues them. Consumers receive a text message confirming the transaction, with an updated account balance.
Transactions are settled through the automated clearinghouse network.
So far, Mocapay has signed several Colorado-based merchants, including convenience-store chain ShortStop, Ink! Coffee, Doc Popcorn, and zpizza, which also has outlets in California. Micros Retail Systems Inc., a Weehawken, N.J.-based technology vendor to the restaurant industry, also agreed to offer Mocapay to its clients for promotions and loyalty programs.
Participating merchants must download software from Mocapay and install it in their point-of-sale systems, a process Mocapay says takes 10 to 15 minutes. That might be a potential obstacle to broad merchant adoption, suggests Chuck Fillinger, a senior associate with consulting firm Strawhecker Group.
“Merchants generally resist downloading software for such individual payment processes, which means it could take a long time to ramp up such a program,” he says, adding Mocapay’s program also has some positive aspects. “Consumers, especially younger people, are intrigued by new payment technologies. Approaching small, regional merchants with such a new technology could be promising.”
Another company, San Diego-based Transaction Wireless Inc., is targeting merchants with mobile-marketing technologies tied to electronic prepaid gift cards. Its hook is customizable cards consumers can purchase for recipients and send to mobile handsets via e-mail and text message.
Each electronic gift card includes a bar code that is displayed on mobile-handset screens merchants can scan at the point of sale. Customers can also print out e-mailed bar codes to be scanned at the point of sale.
The service also enables merchants to send marketing messages to mobile gift card customers. Consumers must opt in to receive such messages.
“Once a gift card is sold, the merchant has no further connection to that consumer, but mobile gift cards create the opportunity for merchants to create an ongoing marketing relationship with customers, sending them coupons, discounts, special offers and loyalty program membership,” says Bruce Springer, Transaction Wireless CEO.
One potential hitch is that only 15% to 20% of U.S. merchants have payment terminals capable of scanning bar codes displayed on mobile handset screens, but that group includes the nation’s largest retailers and department stores, Springer contends. “It’s the case where a small group of retailers is the most important group you want to reach,” he says.
Transaction Wireless also may have found an efficient way to distribute its technology. In February, the company announced an agreement with Fifth Third Processing Solutions LLC to enable broader distribution of the San Diego-based mobile-commerce company’s customizable electronic gift cards.
Fifth Third is providing Transaction Wireless’ wGiftCard technology as an option to its merchant customers through its core processing platform; merchants opting to use the service will pay a fee to Transaction Wireless. Merchants, in turn, typically offer the gift cards to customers at no extra fee.
Kansas City, Mo.-based AMC Entertainment Inc. and Springfield, Mo.-based Bass Pro Shops Group are among the retailers already offering Transaction Wireless’ virtual gift cards, which are delivered by e-mail with a bar code and PIN number that can be printed out and shown to a clerk or scanned at the point of sale. Although neither merchant has yet offered the gift cards to customers through a fully mobile format, they are in discussions to do so this year, Springer says.
Transaction Wireless’ approach to broad distribution through a third-party merchant acquirer is a plus, Fillinger says. “[Transaction Wireless] is on the right track by getting Fifth Third to help distribute it, and if they can make it painless for merchants to implement and easy for consumers to use, it could be a winner,” he says.
The potential for igniting merchant and consumer interest in mobile coupons remains unknown. But as interest builds, merchants exploring this channel may learn what types of offers and communication strategies are most effective. PS
Sidebar
India Citibank-MasterCard NFC Pilot Yields Few Clues On Mobile Coupons
One of the industry’s largest pilots so far of Near Field Communication payments, launched last year in Bengaluru (formerly Bangalore), India, included an element to test the feasibility of using discount coupons within a broader NFC payment program. But only two of the 250 merchant locations participating offered coupons, and consumers downloaded a total of just 150 coupons during the six-month trial.
The effort, however, represented an important step toward helping participants shape the role coupons will play when NFC phones become widely available, observers say.
One lesson learned from the trial is that merchants must promote NFC coupon offers prominently through various channels, including at the point of sale, to spark consumer interest, notes a trial participant who requested anonymity. Merchant participation in NFC coupon programs also requires advance planning. NFC coupons were not a major focus in planning this trial, which was primarily designed to test NFC payment capabilities, according to sources involved in the trial.
London-based Edgar, Dunn & Co., which in March published a report describing the Bengaluru trial, concluded that “NFC technology allows banks, mobile operators and merchants to develop targeted and effective marketing and loyalty campaigns.” However, the trial lacked a framework to measure broad consumer appeal and merchant results from NFC coupons, the report noted.
Satish Menon, executive vice president with Citigroup Inc.’s Citi Growth, one of the trial participants, says it appears consumers were satisfied with NFC coupons offered and the way they were delivered. “However, for the full development of the NFC ecosystem, besides NFC payment applications driven by us, other partners, too, will need to actively participate in communication and create awareness of nonpayment NFC features to increase ... coupon redemptions,” he says.
Citigroup’s Citibank India and Citi’s global growth-ventures group launched the Bengaluru NFC pilot on June 30 with MasterCard Worldwide and other partners. Citi helped to distribute NFC phones to 3,141 MasterCard accountholders.
Consumers could use the phones to make purchases at all participating local merchants’ outlets. Partners included wireless carrier Vodafone Group PLC, handset manufacturer Nokia Corp. and NFC technology firm Vivotech Inc., which supplied contactless terminals and over-the-air transaction software.
During the Bengaluru pilot, consumers could download coupons to their NFC phones by tapping their phones on codes printed on posters and other marketing materials then redeem them at the point of sale by tapping the phone at participating merchants’ contactless terminals.
Fast-food chain Subway System offered customers a free soft drink with NFC purchases of more than 150 rupees (US$3.50), and supermarket chain Nilgiri’s, operated by Nilgiri’s Dairy Farm Pvt Ltd., offered customers a free drink and two cream buns for NFC purchases of more than 300 rupees.
Grocery stores accounted for 60% of the NFC payments initiated during the pilot, followed by telecommunication stores (17%), apparel retailers (8%), bookstores (7%), department stores (4%), restaurants (2%), and petrol stations and drug stores (1% each), Edgar, Dunn said in its report.
