Apple Pay’s missing ingredient
Apple Pay is nearly perfect. They managed to make payment both simpler and more secure than using a credit card. But Apple left out one critical ingredient:
Loyalty cards.
Most stores have these. Consumers trade some privacy (allowing the store to profile their purchases) in exchange for lower prices. While Google and others may support scanning of loyalty cards, Apple can do it better: support loyalty cards by eliminating them.
When you use Apple Pay at a merchant, the payment screen (as the confirmation appears) could include an option to enroll in the merchant’s loyalty program. If the user opts in, Apple would create a random key for the merchant and share that same key with the merchant each time you make a purchase at their store. The loyalty key would be unique to each consumer/merchant pairing, so different merchants would get a different key for you, but a single merchant could easily track your purchasing behaviors (even if they don’t know who you are). In exchange for opting in, you would enjoy all the merchant’s loyalty benefits.
This would be a win-win-win scenario:
- Consumers are happier because they can throw out the stack of loyalty cards without giving up the benefits, avoid the extra steps of getting a loyalty card, and benefit from joining loyalty programs instantly on their first visit to a merchant. Since it’s opt-in, consumers who prefer privacy can skip the loyalty benefits and remain anonymous.
- Merchants are happier because more consumers are joining their loyalty program and they can track purchases of loyal Apple Pay users.
- Apple is happier because of greater adoption and they are no longer fighting with merchants who don’t want to lose their ability to track consumer behavior.
Apple could even facilitate a process where merchants optionally offer greater savings for more information (e.g., within a list of your merchants in the Apple Pay app, you could not only manage your loyalty enrollments, but also share your gender for 5% more discount or share full demographics and get 10% more of the marked price).
Update 15-June-2015: Apple announced that iOS 9 will support loyalty cards. So far, it looks like loyalty cards that are credit/debit cards will be supported, but what about the myriad of loyalty cards that are used in addition to paying (i.e., swipe your loyalty card to get the discounts, then use your credit card to pay). Will Apple support these and, if so, will they be automatically passed in a single payment transaction? Or will they be handled separately requiring two transactions? Currently, many merchants have you swipe your loyalty card up front (before payment) in order to include discounts in the total price. A better approach (for both consumers & merchants) would be to avoid the loyalty card step and present the consumer with two totals: a total price and then the total for loyalty customers. Apply Pay could transmit the loyalty number along with payment to get the discounts and consumers could get their discounts with a single transaction. By associating the loyalty card number (or Apple auto-generating one), consumers would no longer have to carry the extra loyalty card or even deal without it within Apple Wallet after enrollment.
Update 10-January-2016: In November 2015, Walgreens announced it would be the first to incorporate loyalty cards in Apple Pay. Unfortunately, the loyalty card is entered into the phone and used separately, meaning that the user is left to do the work that the phone (i.e., Apple) could be doing. Scanning the loyalty card into Apple Wallet is be a very simple & intuitive way to consent to the loyalty program; that’s perfectly fine. However, Apple should recognize when you use Apple Pay at a merchant for which you’ve registered a loyalty card and automatically send the loyalty card number within the payment process. Instead, the user is forced to make two transactions: first selecting the loyalty card and then selecting the card for payment.