Omnego Inc. has launched a mobile wallet application that converts physical loyalty cards including stores’ coupons, rewards and other merchant updates into digital formats usable on mobile devices such as smart phones, the Toronto-based mobile technology company recently announced.

Mobile-based loyalty programs have gained momentum this year as many merchants have begun to identify mobile marketing as a potential step toward the development of Near Field Communication-powered mobile payments (see story) . NFC supports two-way communication with other NFC chips, enabling users to download coupons, discounts and rewards for redemption at the point of sale.

Omnego’s mobile loyalty and rewards program may be used by any merchant or business with loyalty programs such as gift cards, membership cards or coupons, David Thomas, the company’s CEO, tells PaymentsSource. Participating merchants must also have point-of-sale scanners capable of reading digital bar codes.

To participate, merchants use a Web-based platform to create digital versions of their loyalty or rewards cards, which are exact replicas of the physical cards, Thomas explains. The platform also enables merchants to manage programs associated with the card, such as promotions and deals, Thomas notes.

Merchants send the same card data they feed to physical card manufacturers to Omnego, and “we generate the initial mobile card and send it to the (user’s mobile) phone,” Thomas explains.

Participating merchants pay a fee only when consumers accept mobile cards or coupons, Thomas says. Merchants also pay a monthly fee for platform usage and advertising.

Consumers may participate by downloading a free Omnego mobile-wallet application called Walgo onto their smart phones via the Web, Thomas says. Through Walgo, consumers may choose to receive mobile loyalty cards, coupons, rewards and advertisements from specific merchants. The application is available for all major smart phone operating systems including Apple Inc.’s iPhone, Google Inc.’s Android, Research In Motion Ltd.’s BlackBerry and Nokia Corp.’s Symbian.

When visiting a participating merchant, consumers may use the mobile wallet to retrieve the merchant’s digital card to transact and view available offers or coupons, Thomas says. Consumers also may access general Web content and other information about the merchant via the application.

A medical-products company is the first merchant to use Omnego’s service. Omnego will begin working with a sporting-goods merchant before the end of the year, the company says.

Mobile-based loyalty and rewards program are definitely becoming more popular because many merchants are exploring promotional opportunities harnessing mobile phones, says Todd Ablowitz, president of Double Diamond Group, a Centennial, Colo.-based consulting firm.

“Merchants also are looking for ways to differentiate themselves and gain the attention of consumers to increase loyalty,” Ablowitz says. And right now, “the belief is that mobile is the ticket.”

The main challenge for many merchants is that not every consumer will want to participate, Ablowitz says. Mobile technology companies like Omnego need to figure out how to attract merchant attention as well as how to entice consumers to participate, he contends.

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