The mobile technology craze is starting to sweep up loyalty programs, placing pressure on banks to brush up the reward redemption experience to meet consumer expectations.
JPMorgan Chase's response to this trend was to design a mobile app to ease the navigation required for redemption of cash-back rewards. The app, called Chase Freedom Mobile App, is available on both Android and Google and has attracted about 30 merchants thus far, including Starbucks, Regal Entertainment Group and Gap.
"Consumers have been able to redeem cash-back rewards from apps for more than a year, but it was a two-step process," said Jennifer Roberts, the president of strategic alliances and loyalty solutions for Chase, referencing the prior method that involved a physical gift card. "We have made it a one-step process."
Consumers use the app to select a merchant and the reward amount to use toward a purchase; they then pay using a new e-gift card that's created directly on their device.
Marketing lures such as rewards, loyalty and gift cards lagged other functions in migrating to mobile payment apps. Apple Pay, for example, does yet accommodate loyalty or rewards.
Chase is responding in part to the introduction of large mobile wallet initiatives, such as Apple Pay and Android Pay, and the appetite those products will generate for mobile financial services. "Our customers are not just engaging with us, but with these wallets at an increasing rate," Roberts said.
But independent of the mobile wallet movement, many retail marketing programs are starting to include mobile or online tools to meet consumer demand and provide better data to merchants.
First Data, for example, has made pair of acquisitions over the past two years to flesh out its digital gift card program. And the Retail Gift Card Association's research found 80% of consumers want the gift cards they buy as presents to be easily redeemable online or in person based on each recipient’s preference.
"There is more of a trend to digitize gift cards. Our customers are moving to mobile and usage of mobile apps continues to increase," Roberts said. "We want to deliver benefits in way that's exactly how our customers are interacting with us today."'
The digitization of rewards and loyalty programs can benefit all participants in the payments industry, said Rick Oglesby, head of research for Double Diamond Payments Research.
"It's obviously an area where banks have some traditional strength due to their card-based rewards programs, and they can build on those rewards programs to create better experiences and enhanced programs for their consumers and merchants alike," Oglesby said.
Apple, Google and others can also benefit as the enablers of the technology and customer experience, Oglesby said. "In this example, it's likely that Chase will eventually need to merge this program together with Android pay and/or Apple Pay in order to provide the consumer with a seamless, unified experience."