Have We Just Seen Mobile Commerce’s Killer App?

After almost a decade of predictions from preeminent analysts on the rapidly forthcoming ignition of mobile payments that never quite panned out, at least one thing seems to have been proven conclusively true: The prospect of using smartphones to enable commerce in both the online and physical world is a lot more existing to the innovators than it is to the average Joe or Jane, who has to adopt it to ignite it.

The reasons for that are complicated, as we’ve well reported here. But when reduced to their simplest terms, the issue is pretty simple: nothing, so far at least, has been compelling enough for consumers to change their existing shopping and buying habits – whatever they may be.   

And compounding this somewhat is that almost every new payments and commerce innovation has asked consumers to “trade off” something that worked pretty well for them, for something that has created more friction and bigger problems for them rather than the value as advertised.

That is something that Visa hopes to change.

Last week, sort of tucked inside of its Q1 earnings and then a day later via a Friday morning press release, the world’s largest payments network launched the Visa Commerce Network. Think of it as an interoperable, ecosystem-wide promotions engine that connects merchants with offers to give to consumers with Visa accounts, seamlessly and automatically, but with a powerful and sticky twist. Instead of just making it easy for offers to be tracked and redeemed, consumers are given incentives to try new experiences at new merchants that they may not have tried before.

So, Uber customers get rewarded with discounted rides for trying out Shake Shack, or shopping in a specific grocery store. The trick here is to prime the pump for trying something new by giving existing consumers a reward for doing so.

Built off the TrialPay platform that Visa acquired in 2015, the Visa Commerce Network is a way to make promotions less friction-filled, and it stimulates the one thing that merchants want more than anything: an efficient way for them to acquire new customers. And the best way to do that is to leverage the relationships that existing merchants have with their customers – sort of a “hey, thanks for being a loyal Uber customer – here’s something off a meal at Shake Shack.”

“Visa Commerce Network enables our merchants to deliver targeted discounts and benefits to Visa cardholders in order to acquire new customers and increase sales,” CEO Charlie Scharf noted during his announcement of the program during Visa’s Q1 earnings call with investors.

“Visa cardholders receive these benefits seamlessly by simply using their Visa cards to make purchases. No coupons or codes are required.”

And those benefits also may come with something else that the ecosystem has been waiting for: a way to ignite mobile commerce and a new business model that links the return on that investment to customer actions.

As we know from other mobile commerce schemes in which loyalty and promotions are the front end that pulls through mobile payments, merchants are happy to pay more – and much more — than interchange rates if a new customer lead comes along with it. Visa Commerce Network is set up to deliver that. At the same time, it fixes one of the biggest points of failure in the industry today: loyalty and rewards programs.   

Loyalty and Rewards — Oh So Broken

Merchants want customer data, their customers want to know that they are getting a good deal. This is the fundamental logic that underlies most retailer reward programs and, according to Karen Webster, is the source of one of the more common mistakes in building them. 

“Give something to get something is an age-old and very familiar adage. And it’s the premise of a lot of online marketing programs: give up an email address to get [fill in the blank]. It’s also the premise of a lot of loyalty programs: give up name, address, and email address in exchange for discounts and other goodies,” Webster wrote at the start of 2016.

“It’s one of the ways that retailers have tried to compensate for the lack of data about the customers that walk into their physical stores – enrolling them in their loyalty programs gives them the ability to create a record of what’s been bought and how frequently consumers shop at that retailer.”

The problem, she says, is that those programs aren’t very sticky — they don’t tend to retain user interest past whatever initial bribe was given to get the email address. Merchants then get exactly what they have asked for: a customer email address for a customer that has absolutely no interest in being a loyal customer beyond whatever was offered to get them to give up their email.

And another big fat opportunity in mobile payments and commerce land goes unexploited for another day.

“Loyalty can become the killer app for digital payments in much the same way that points were the killer app for card acquisition back in the day. Creatively integrating loyalty capabilities into payments apps can help retailers get what they want — data on consumer behavior in their stores and a way to communicate with them – and consumers what they want – a benefit for being a loyal customer – and payments apps players what they want – adoption of their payments method online without violating consumer privacy or data security,” Webster wrote.    

But nature abhors a vacuum — and Webster did predict that 2016 would be the year that the ecosystem would see “loyalty programs reinvented around data, payments and enabling platforms that simultaneously give consumers the incentive to give up the right data to get something of value from a retailer – and for that to become the foundation for building a lasting relationship between that consumer and that merchant.”

And, hey, speaking of that  ….

Visa Commerce Network’s Goal: Being Everywhere Consumers And Merchants Want Them To Be

Visa Commerce Network hopes to kill the two things that characterize the sorry state of loyalty and rewards these days: forcing consumers to keep track of zillions of coupons and discount codes, and ending the world in which consumers are forced to sign up for rewards programs to get a discount (on average that’s about 30) only, on average, to use less than half of them.

Visa’s plan for that first pillar is ease of use: Consumers can receive and redeem offers after accepting offers online by using their Visa cards directly or via a mobile device. All tracking and redemption of promotions are managed by Visa and seamless to the merchant.

A consumer who gets a meal discount with a hotel stay, for example, would no longer have to collect a paper coupon and shlep it to the local steakhouse to collect their discount if both merchants are participants in Visa’s Commerce Network. Instead the discount would be logged when the consumer booked their stay — and applied automatically when they swiped their card at The Townington House of Beef And Vegan Dishes’ POS.

But beyond being easy for the consumer and the merchant on redemption, it also comes with enhanced data for the participating merchants. Participating merchants get real-time reporting on their programs with the ability to see how offers and promotions are impacting local spend throughout the campaign lifecycle. It also comes with the kind of scale that only Visa, as the largest payments network on the planet (and 100 billion or so transactions per year), can carry in its wake – and the promise of hundreds of millions of cardholders enrolling and participating.

“This is a service where everyone benefits,” said Ramon Martin, global head, merchant sales and solutions, Visa Inc. “Visa cardholders get access to great offers that don’t require any changes to how they pay, while merchants can acquire new customers and increase sales. By coupling the power of Visa’s payment network with our merchant partners, we are unleashing value for businesses, issuers and consumers alike.”

Why It’s Something To Watch

If for no other reason, Visa Commerce Network is worth watching for all the high-profile partnerships it announced along with its launch. 

Starting next week, some Uber customers in 10 U.S. markets who enroll in an offer and use their Visa card at any local grocery store can earn discounted rides, and will automatically be entered to win an all-expense paid trip to San Francisco for the Super Bowl on Feb. 7. (Speaking for all of us in Boston, we’re a lot less excited this week by that particular promotion, but still …)

“We are always looking for new ways to delight our customers and offer unique local experiences.” — David Richter, Uber’s vice president of strategic initiatives

“We’re excited to partner with Visa on this initiative.”

That rollout follows a test run in Boston in mid-December which saw Uber riders snag discounted Uber rides when they used their Visa card at their local Shake Shack.

Post-campaign data analysis show that Shake Shack benefited in two very significant ways: they acquired new customers and those customers spent more with them.

“Participating in this program was seamless. Guests could receive their perks without the need to change how they pay at the counter and because all of the rewards happened on the backend, it was a great activation without the need to train team members,” said Laura Enoch, senior marketing manager of Shake Shack.

However, bigger than its early run, the program is also interesting, especially when taken as a one-two punch with Visa Checkout. Clearly one of the ambitions of the Visa Commerce Network is to expand the distribution and scale of Visa’s online acceptance mark.

It is hard to make any predictions, and we usually don’t. And Visa Commerce Network is brand new. But it’s definitely one to watch to see if and how it scales. If Commerce Market can connect enough merchants with enough actionable data and make consumers lives easier to boot — well, that might just be getting pretty close to the loyalty killer app Karen Webster was talking about when 2016 rang in.

We’ll keep you posted.