Bygone are the times when some people used to claim that mobile payments are depriving customers of their cashback rewards. Today, it has become easier than ever to redeem rewards as a client. Multiple card issuers are innovating by offering cashback rewards for mobile payment usages with the clear aim at urging clients to make their respective card the default card for payment. According to a Business Insider’s Mobile Payments Report, the number of mobile payment users is projected to be 150 million by 2020 while the total of in-store mobile payments is expected to be $503 billion by 2020. The interest level shown with rewards was also noted to increase year over year.
Providers are pampering mobile payment users
Rewards top the list year-after-year for being the most attractive feature on customers’ preferred credit card. Many card issuers know this aspect and are finding new ways and means to entice clients with rewards, urging them to use mobile payment as often as possible. For instance, the U.S. Bank is offering triple rewards points for every $1 of mobile wallet purchases carried out with its Altitude Reserve Card. Wells Fargo, on its side, is offering 1.8% cash rewards on certain mobile wallets; payments made with Wells Fargo Cash Wise Visa are even entailing a 20% bonus. JPMorgan Chase, which pioneered by offering the world its Chase Pay digital wallet in 2015, allowing shoppers pay using their phone whether they’re online, in stores, or dining at restaurants, will now offer contactless payment with quarterly cash back rewards for the first time as from January 1, 2018. Cardholders will be able to accumulate rewards on everyday purchases without having to fumble for their credit cards at checkout. Many other retailers have now begun heading down a similar path as well by proposing their own app.
A strategy to hook clients to a card
Behind this move is the simple tactic to hook clients to set their respective cards as the main payment method: when a card is set as the primary payment method in an app, it is improbable that cardholders will stop and switch in the middle of a transaction. An example would be a commuter rushing to get her coffee and simply paying with the mobile payment app without having to choose which card actually makes the payment.
In this battle between providers to push customers to make their respective card the default one, the true winners are undeniably the customers themselves. The reward tactic has always proved to be a winning strategy, driving customer preference. Compared to merchant apps, credit cards do not have the complete functionality. In this sense, card issuers are obligated to drive customer preferences by dangling rewards like carrots. As a result, the current battlefield between card issuers is filled with reward components, one more tempting than the other.
Reward incentives are here to boost mobile payment
Reward incentives are not a new strategy. They have already been adopted by payment systems such as Samsung Pay, which launched its own Samsung Rewards program earlier. Based on a card points program, it rewards users with points for making a purchase. These points may be redeemed as rewards on Samsung products, prepaid cards, and prizes.
In certain cases, cardholders can double-dip on rewards points by acquiring one bonus for using a particular payment system and a second reward for making payment with a particular credit card.
Two years ago the scenario was different and critics were claiming that customers of mobile wallets were being robbed of their rewards: for instance, if a card was offering bonus points for being used, the payment was recorded as going to the app instead of the merchant using the app.
Offering bonus rewards for mobile payments benefit card issuers. They are a method to retain cardholders and transaction fees. Mobile payments also allow issuers to strengthen their relationships with consumers. For instance, they can collect data on mobile purchases, as well as location-sensing and automatically add benefits and discounts in a seamless approach at the time of purchase. In this sense, customers can redeem rewards effortlessly.
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