Jean Woodworth, Vice President Product Strategy, FIS
Psyma research underscores untapped opportunities for bigger wins for merchants and their partners.
Warring retail giants offering one-day delivery, advanced loyalty programs and on-the-spot credit approvals are resetting consumers’ expectations about immediacy during their customer journeys. With digital access to funds anywhere and at any time, consumers gravitate to institutions that best fulfill their demands for convenient, frictionless transactions.
Questions that smaller institutions should be asking include: How do we compete against big players successfully? What support can our partners provide?
Research uncovers merchants’ concerns
Sponsored by FIS, Psyma conducted research with a cross section of 300 merchant services decision-makers in the United States (U.S.). The sample includes pure-play e-commerce companies, non-e-commerce firms and hybrid – selling both online and offline – businesses. Conclusions include:
- In today’s environment of massive corporate breaches and a plethora of bad actors, fraud prevention remains a top priority for companies.
- U.S. merchants are preparing for contactless payments, which will reduce transaction friction for customers.
- Merchant services customers view their ability to accept payments cards as a critical component of doing business.
- Merchant services customers are underutilizing marketing tools created to encourage customer retention and incentivize higher spending.
- Loyalty programs could deliver bigger wins for merchants.
Loyalty programs require a fundamental shift
Loyalty programs in the U.S. have evolved during the course of more than two centuries,
Today, it’s possible for any merchant to have a loyalty program, and data analytics enable personalization of rewards. However, many programs still fall short of fulfilling consumers’ desires for immediacy and convenience. For example, legacy loyalty models create friction by placing the burden of redemption on consumers and making program members wait a long time to accumulate enough points to be meaningful. A recently-released
Reflective of the fundamental shift now occurring in loyalty is the FIS Premium Payback program – delivering “surprise and delight” when members are offered an instant rebate on their purchases at point of sale (POS) when they’ve accumulated enough points. Premium Payback removes friction from redemption and enables smaller merchants to build repeat patronage while burning points off their books. Feedback based on research reflects its success in driving repeat patronage and increased spending:
- Thirty-seven percent of Premium Payback users accepted their offers to redeem points when prompted at POS.
- Participants spent 143 percent more than customers without a rewards program.
- Fifty-six percent of consumers felt that Premium Payback is a better value than alternative redemption offers.
- Eighty-eight percent of triers would use Premium Payback again.
- Participants doubled the number of purchases at the retailer providing the offer.
Real-time lending also fulfills demand for immediate gratification
Loyalty represents one area where responding to consumers’ desires for immediate gratification pays off. Another area that pays off is real-time lending approval.
Point-of-purchase (POP) lending – money advanced to consumers to complete the purchase of a specific item and usually repaid over a fixed period – eliminates the burden of being approved for an installment loan in the traditional way by providing real-time loan approval. Additionally, digital access makes it convenient for consumers to fund large purchases.
POP lending helps smaller institutions level the playing field against large competitors that are equipped to provide proprietary financing vehicles for big-ticket items.
POP lending can be offered by financial institutions, merchants and third parties, and be provided at any time during the customer journey – pre-purchase, during purchase at POS or post-purchase. When a potential lender makes the offer aligns with when they typically interact with consumers. For example, financial institutions typically offer POP loans pre- or post-purchase while merchants make the offer at POS.
Studies show that the majority of consumers mix online and in-store shopping when making major purchases – typically researching online and buying in store, often based upon where they can take advantage of a sale. Having researched prices before entering the store, consumers can obtain loan approved from their financial institution pre-purchase and, thereby, not miss out on a good deal.
Consumers can be prompted at POS by a merchant with a POP lending offer that may provide better terms than their credit card company.
Post-purchase, issuers can prompt consumers with an offer for a lower interest rate, or consumers may initiate an inquiry about obtaining a lower interest rate than what they pay on revolving credit.
POP lending can potentially benefit all stakeholders:
- Consumers receive immediate gratification of owning their desired item and the likelihood of realizing a good deal.
- Financial institutions reap financial rewards through higher loan volume, increased revenue and deeper engagement with customers.
- Merchants increase sales and create new streams of revenue.
- Third-party vendors further their platform sales and expand their services to different kinds of businesses.
FIS Merchant Solutions help businesses grow
FIS Merchant Solutions are designed to leverage the size, strength, relationships and technology expertise we’ve cultivated over the course of our 50 years’ history of driving success for our clients. Our merchant program delivers the payment solutions, security and support that meet the needs of merchant customers – and helps them realize a better way to grow their business.
