Money Mind Games
Digital currency reworks traditional notions of cash, plastic.
“But mobile is a tool,” he said, conceding the role phones will play in facilitating change. “The larger or more powerful thing is people’s behavior.”
Retailers are always looking for opportunities to bypass credit- and debit-card fees. More trials such as Maverik’s are emerging, and a combination of alternative payment and customer incentives has promise.
“Our loyalty program is one of the main vehicles we use to communicate and interact with our customers, and our mobile app is at the center of this program and engages the customer on all aspects of our loyalty offering,” says Call of Maverik. “Our goal is to capitalize on this great tool and increase its value with payments and other fun features.”
Such savings can be as much as 75% of transaction costs, according to Bob Burroughs, senior vice president of product marketing for relatively new loyalty firm Sionic Mobile in Atlanta. He calculates it this way: For a $50 fill-up, a merchant may pay 2% in credit-card fees, which is $1. Sionic earns its income on the distribution and use of rewards, so the cost of the transaction for retailers is 25 cents, because Sionic uses Dwalla to process the charge.
But beyond that cost savings, Burroughs and his team have developed a coalition-style loyalty system in which customers can earn “ions,” or points for shopping at specific merchants, and be able to redeem those points as they build up. Having started the business three years ago within concessions at airports, his firm has expanded to the larger retail space, with a new feature involving fuel purchases at convenience stores.
The overall processing has customers using his company’s mobile app, in which the customer takes a photo of a blank or voided check and uses it as payment. It’s not an ACH transaction and it avoids major credit-card routing, he says.
Much of the flexibility comes from banking developments, most specifically the Check 21 measure that came through in 2003. Prior to that, banks settled check payments by physically transporting enormous amounts of physical checks to each other. The Check 21 reform allowed banks to send digital images of checks to settle transactions. As an outgrowth of that convenience, digital checks—or photos of them—are now an accepted form of transferring payments between parties.
But just because a merchant finds a transaction appealing doesn’t mean a customer will, Burroughs points out: “That’s why we based our payment strategy on giving the consumer a reason to pay with a phone. It’s the reward of ions and getting the benefits with future purchases.”
From a retailer perspective, the time to get into the game is now, Call says. “A lot of companies are sitting back and waiting to see what solution prevails,” he says. “But I believe those who embrace the technology and get involved in the movement will be far ahead of their competitors.”
Yet just as retailers begin to see the potential of digital currency for their businesses, new challenges can arise. For instance, in Wolman’s presentation, he gave the example of a CPG manufacturer thinking out loud about how these new currencies could allow brands to communicate directly with consumers. Points could be tied to a big-name candy bar or cereal and entice the consumer directly—ignoring or even bypassing the retailer altogether.
“No doubt the brands are getting closer to the consumer,” says Anton Bakker, president of Outsite Networks, Norfolk, Va., whose company has developed an app that can consolidate brand searches and help consumers find retailers carrying their favorite brands. “But I don’t think the retailer will ever get cut out. It’s an impulse [channel].”