In part ten of our payments Q&A, we hone in on the gift card and loyalty niche. We spoke with Holly Glowaty, Co-Founder of K+H Connection and Flourish Conference, to discuss gift card and loyalty trends for 2020, the importance of contextual commerce, and how AI and machine learning are making waves in loyalty.
Ashley Poynter: Are there any gift card or loyalty solution providers or merchants who stood out in 2019? Why?
Holly Glowaty: I feel like loyalty had a big year; across the board. I think a lot of it has to do with merchants saying “no” to a one-size-fits-all model, and really using customer data to provide better experiences for their loyalty program members. Chipotle alone added 7 million people to their loyalty program this year… and they launched it in March! That’s some major growth rather quickly. Advance Auto Parts rolled out their Speed Perks 2.0, and what impressed me most, was how they really focused on their “DIY” segment. They were pretty explicit about it. They set clear goals and measured the success thoughtfully. Advance Auto Parts increased enrollments in Speed Perks by 80%, driving up spend attributed to Speed Perks by 45% in the “DIY” segment and getting people to come back in one other time to redeem coupons or offers in record numbers. They had clear goals and measurements in place to drive very specific behaviors, and that kind of focus makes a loyalty program work.
On the gift card front, I think what is exciting, is seeing how people are using gift card technology in new and different ways. Jifiti is using gift card tech to power point of sale financing for both in-store and online; which is revolutionary in my opinion. We also have been reading about companies using gift card and blockchain for cross-border remittance in Africa and South America. These are more work-arounds right now as they deal with money-transfer issues; but I think they are on to something larger.
Ashley: What is your “big prediction” for Gift Card Payments in 2020?
Holly: I think contextual commerce will be a bigger trend in 2020. Gift card or branded currencies of any type make total sense in the contextual space. Especially with Gen Z driving the experiences that are expected in retail. Merchants are going to need to be meeting these very savvy consumers where they are.
Ashley: By next year, 40% of US consumers will be made up of Gen Z, who are spending an estimated $143 billion a year. How will this impact digital payments trends as well as how businesses respond to changing consumer demands?
Holly: Like I said above contextual commerce will be big with this generation. They value conveniences that contextual commerce can bring. In early 2019 we conducted focus groups with Gen Z students, and what shocked us most is how many of them prefer physical payment cards over digital (and almost all of the research we compared ours against confirms this as well)! What we believe to be the underlying reason is they like the confidence of having their tender or payments, in a separate place from than their phone. The worry being: if they lose their phone, they lose everything.
Gen Z also loves to instagram! Digital gift cards are not super instagrammable. A physical card gives them something to hold up in a photo. BUT this does not mean they don’t care about having the digital payment experience; they expect to have both digital and physical available. It is also a little too soon to know what their payment behaviors will become once they are paying for more things on their own, and making choices more frequently about how they pay and what conveniences mean most to them as adults.
Ashley: Personalization is a hot topic across industries, but especially when it comes to payments and loyalty. What are the major roadblocks in creating truly personalized incentives and how can merchants overcome them?
Holly: As we talk to retailers, we notice the term personalized and customized are often used interchangeably, and I really want to stress how they are not one in the same. A personalized experience can in-fact be mass produced. For instance things as simple as color choices, event themes, funny sayings, image options etc; can all provide a custom experience that makes someone smile or laugh or connect at some level. We have to get over the idea that everything has to be hyper-custom to make it feel personal.
Ashley: Artificial intelligence (AI) and machine learning (ML) are also stealing the spotlight in the payments space. What sort of trends are you seeing regarding this technology in gift cards and loyalty?
Holly: There is a lot going on with AI and ML in loyalty right now. It makes sense from a predictive learning perspective. The purpose of a loyalty program is to understand how your customers are behaving and to try to encourage specific, repeat behaviors. So if we can learn from past behaviors and predict how they might react to offers or rewards, it makes for a successful and streamlined customer experience that feels intuitive and rewarding.
In gift cards, we are seeing AI and ML applied in fraud mitigation most heavily. We are looking at patterns across eCommerce, in-store and 3rd party to help establish patterns of fraud, and help predict where it will come next. It also helps recognize and stop fraud faster when someone does get through.
If you missed our other Q&A articles, you can view them here:
- Payments Q&A: IBM’s Dave Maddox on Consolidation, Emerging Payment Platforms, and Blockchain
- Payments & Fintech Q&A: Scarlett Sieber on Apple Card, Gen Z, and Cryptocurrency
- Quick Hit Payments Q&A with Holly Hughes
- Payments Expert Q&A: Gregory Leos Talks Acquisitions, Digital Payments, and Mobile Skepticism
- Payments Leaders Q&A: Fiserv’s Stephanie Foster Discusses 2020 Predictions, Connected Experiences, and Open Banking
- Payments & Cybersecurity Q&A: Dominic Vogel Talks Data Breaches, PCI Compliance, and Top Payments Threats
- Real-Time Payments Q&A: David Jackson Talks Faster Payments Task Force and Real-Time Payments
- Payments Q&A: TM Praveen talks Payments Digitalization & Machine Learning
- Fintech & Payments Q&A: Bryan Jurewicz Talks Cross-Border Payments and Industry Consolidation
Stay tuned in the coming weeks. I will be interviewing more experts on the evolution of the payments world, shifts in the ecosystem, and what to expect in 2020.
If you’re interested in participating in one of our Q&A With the Experts series, please send us a note here.