Where loyalty lies: how biometric smart cards will shake up customer relationships with retailers
By Vince Graziani, CEO, IDEX Biometrics ASA
The retail sector has experienced near total disruption in the last 12 months. An outsized shift to online shopping, a move away from in-store experiences and changes to customer behaviour has left retailers needing to adapt following the pandemic shake up. According to Gartner’s latest research report, 73% of CMOs will rely more on existing customers this year as opposed to growing new markets as they rebuild. This means that the retailer’s survival is going to be based on building loyalty and encouraging repeat purchases. Enhancing these relationships with existing shoppers therefore points to a need to maximise in-store loyalty schemes.
We’re quickly moving to a cashless tap-and-go society thanks to huge advancements in secure touch-free payment methods, such as contactless cards and mobile payment apps. But when it comes to loyalty programmes, with the average consumer in the US belonging to more than 14 loyalty memberships on average, our wallets, fit-to-burst with plastic, are yet to see the benefit. It’s telling that these consumers are only active in seven of these memberships on average. This reveals that customers aren’t seeing value in a large number of their loyalty programmes.
Where loyalty card programmes currently fall short
When you look at traditional forms of digital payment authorisation, it’s easy to see how consumers and retailers are being so readily exploited. They commonly rely on information known to the user, such as passwords, date of birth and mother’s maiden names. The trouble is that this information can be easily stolen. Just one bit of information is all that a cybercriminal needs to steal a user’s online identity. With this, they can withdraw funds from a bank account, apply for a credit card or make online purchases.
There may be numerous factors at play here. Perhaps the excess wallet weight is making consumers less likely to go in search of their loyalty card for fear of slowing down the store queue for others – a factor which may be even more prominent in the current pandemic. It may also be the case that the rewards themselves are not as inviting. Data from Merkle found that only 39% of marketers use customer data to enhance loyalty programmes. This is a missed opportunity and can cause a disconnect between the brand and the customer. It also leaves retailers in the dark when it comes to that precious commodity, customer data.
Perhaps more alarmingly, most programmes fall short where customer data security is concerned. Requiring very limited sign-up information, customers are often supplied with a loyalty card that lacks a PIN or even a name attached to it.
There are two sharp consequences of this absence of authentication. Firstly, there is nothing to stop a customer sharing the card among friends, family, or even the person in front of them at the till. This renders the loyalty data unreliable. Secondly, and more damaging to both the retailer and the consumer, it leaves the programme wide open to loyalty fraud. This occurs when fraudsters make use of stolen cards or compromised login credentials to either spend or re-sell loyalty points, ‘buy’ goods or steal customer data.
There is a huge amount of value sitting in customer loyalty memberships. For example, Starbucks has $1.6 billion of unspent cash on customer loyalty cards. Therefore, fraudsters have much to gain by targeting these cards. As a result, loyalty fraud costs the retailer heavily both in terms of goods and reputational damage.
So how can retailers improve the security of their loyalty programmes and deliver maximum value by harnessing the power of the data they provide?
Give loyalty the same biometric security as payments
Fingerprint scanning is now ubiquitous as a proof of ID thanks to most smartphones incorporating this layer of security. As a result, it has gained trust and acceptance from consumers. When added to a payment card, fingerprint biometrics provide a familiar, and secure way to authenticate payments. The biometric authentication also eradicates the need for contactless payment limits, whilst deterring fraud or theft attempts – as the card will only work when in the hand of the registered user.
It therefore seems only fitting that this level of security infrastructure is implemented into loyalty cards to protect consumers and retailers while preventing fraud. Importantly, the technology to provide this closer alignment between payment and loyalty is already available, through fingerprint biometric smart cards. Incorporating fingerprint biometric sensor technology into a smart loyalty card ties the customer to the card, ensuring loyalty data is secure, trustworthy, and personalised.
The all-in-one frictionless experience
Boosting convenience for the consumer, biometric smart cards can also provide the technology for the ‘all-in-one card’ – a huge advantage for retailers or payment providers to attain top-of wallet status and banish shoppers’ bulging wallet woes. It means that one card can provide biometric-standard security for multiple purposes such as payments, loyalty programmes, transport cards and identity.
Biometric smart cards provide a frictionless store payment experience that won’t compromise security and privacy. With the smart card easily storing all customer and payment data in one place and making it readily available, it perfectly serves today’s tap-and-go consumer. Meanwhile the retailer can have absolute confidence that the data contained within the card belongs to that individual.
Futureproofing the shopping mall
Not only do biometric smart cards provide the convenience and security that consumers and retailers need today, but it also offers a completely touch-free experience. With the fear that traditional PIN terminals and touchscreens can facilitate the spread of coronavirus; a touch-free shopping experience is now an essential part of the high street’s future.
The payments industry was already moving this way, but the pandemic has accelerated the requirement for deeper insight into customers, their lifestyles and the way they behave, but also the other factors at play when they leave a store. The future of loyalty programme, therefore, may eventually depend more heavily on brand collaborations and data sharing to restore growth.
Optimising future customer relationships
Armed with much more actionable data on how customers behave, retailers can then personalise the customer journey, provide more inviting rewards and generating repeat sales. And with a loyalty card this is guaranteed to be tied to the user, it is easier than ever for retailers to leverage personalisation, optimise future customer relationships and reward customer loyalty.
Without a doubt, the way that consumers shop has changed forever. The shift to a predominantly touch-free shopping experience has been accelerated and customers now expect added value from high street retailers. Therefore, new ways of making the customer loyalty experience safer, quicker, and more personal are essential. Fingerprint biometric cards offer the potential to shake up the high street experience for the future.