Communications Service Providers, mobile device vendors, and operating system vendors are all formulating their own strategies to capture the payment market. The introduction of Near Field Communications (NFC) technology broadly into mobile devices is the key enabler for users to execute payment transactions by touching devices together. These players all see an opportunity to grab a slice of the huge payments business that credit card companies now dominate. Mobile payments using NFC is potentially very disruptive to the status quo.
From a user perspective, mobile payment seems like a small improvement in convenience. Digital technology may provide improved security and fraud protection over the extremely vulnerable scheme of authenticating a credit card number on a physical card with a matching customer name, security code, expiration date, billing address, PIN, or signature. Improved security and fraud protection would be a compelling motivator for users to adopt this technology.
While users will use mobile payments to replace some of their credit card transactions, it is unlikely that credit cards will disappear any time soon. Mobile devices with NFC are still not common enough. Even the Apple iPhone 5 does not support NFC yet, although it would be extremely surprising if the next major iPhone release did not include NFC support.
Where NFC can provide an even greater convenience is to track loyalty points and rewards. Users carry around a huge stack of loyalty cards in their wallets and on their key chains today. Every vendor has their own loyalty card. It is not uncommon to carry dozens of these. We have cards for grocery stores, pharmacies, coffee shops, retailers of every kind, airlines, hotels, car rentals… the list is endless. What I would like to see is a popular app become the de facto standard in tracking loyalty points universally, so that users can finally shed themselves of all those physical loyalty cards.
A universal loyalty app makes many other side benefits possible. The most important is personalization. A patron of a restaurant can be identified when they check in with their mobile device. They will be credited points at the end of the meal. The customer’s identity can be used to retrieve their food and service preferences, so that without needing to ask the server already knows the customer’s dietary restrictions, allergies, and favorite foods and drinks. The overall experience would be improved for both the server and the customer as communications are streamlined.
A universal loyalty app can also become the means by which coupons and promotional offerings are distributed by vendors and carried by users. This would be far more convenient than carrying around paper coupons. The app can perform important functions like reminding the user to use a valuable coupon before it expires. It benefits users to redeem more savings, and it benefits vendors by promoting more business.
A universal loyalty app can also become the means by which users may track purchases (keeping a copy of every bill) and their associated warranties and protection plans. An app could easily record purchase dates and vendor information, so that users no longer need to keep paper warranty agreements in a physical filing system.
Having loyalty points, coupons, and purchases tracked by a single app will also enable other innovations, such as dynamically calculated coupon values or promotional pricing to reward users proportional to the value of their past purchases. It also enables vendors with cross-selling opportunities to target users based on recent purchasing decisions. It opens up many avenues for innovation that we cannot even think of today.