Loyalty Is in the (Private) Cards

Retail merchants are looking at contactless payments combined with private label credit cards to drive more customer loyalty, according to the Javelin Strategy and Research report "Contactless Payments: New Merchant Data Reveals Opportunities and Threats for Bankcard Issuers." A private label credit card is one is that is issued by and accepted only at specific merchant locations. According to the report, roughly 35 percent of the merchants that are considering contactless payments see private-label cards as best helping them drive revenue or meet business goals. Only 5 percent cite major credit cards(American Express, Discover, MasterCard, Visa,) as helping them meet these goals. To compete, major card issuers will need to offer contactless payments as well, according to Bruce Cundiff, research analyst at Javelin. "Merchants feel that if they private label a card, they will benefit from increased revenue opportunities," Cundiff says. Additionally, if that private card can be combined with contactless payments, then merchants and customers alike can track loyalty points, another catalyst for customer loyalty. Among those merchants considering contactless payments, cash and gift cards are seen as the most expensive payment options, according to the report. They see contactless payments as a way to convert cash transactions to a less expensive option. Another driver for contactless payments is that they can be placed on a transponder, downloaded to a cell phone, PDA, or other device that enables quicker transactions than the typical plastic card as well as the ability to track loyalty information, according to Cundiff. "The market for contactless payments started about two to three years ago; there were some earlier programs, most notably Mobil's, then Exxon Mobil's, Speedpass," Cundiff says. "Then the middle of last year Chase made a major investment [in the technology] with brand development, acceptance locations, and rollouts is certain cities." That rollout is continuing this year, so Cundiff sees 2007 as the year that contactless payments will take off or fail as a payment technology. How much contactless payment by itself will drive customer loyalty will largely depend on the industry, according to Cundiff. "If someone is choosing between [quick service restaurants] and the line is always shorter at one than the other [due to faster contactless transactions], then it could drive customer loyalty," Cundiff explains. "But if it's a choice between buying at one retail store or another, the ability to save 15 seconds on a transaction probably won't mean that much to the consumer." Related articles: The Future of CRM: Real Time Smart Cards: The Keys to Future Business Security