Apple Pay rolled out last month just in time for the holiday season and the flurry of purchases that accompany it.
According to Apple, more than 10 million iPhone users are able to make purchases at 220,000 U.S. retail locations using Apple Pay. Though Walmart, Rite Aid and CVS have rejected Apple Pay in favor of the yet-to-launch CurrentC, reports from Whole Foods that more than 1 percent of transactions are made with Apple Pay indicate that the newest digital wallet is already changing how Americans shop and buy.
Addressing customer concern over recent high-profile data breaches, Apple pay uses a combination of physical security and tokenized account processes. When a consumer uses Apple Pay, a temporary account number, advanced encryption chips in the phone and the customer’s fingerprint are all used to complete the purchase.
The process makes all payment related data remains anonymous to both the retailer and Apple. Apple has even announced that they will not collect or share any customer data. Instead, they will focus on improving the customer experience by making mobile payments safer and easy to use. Retailers have to consider the downside of this decision. When payment information is tokenized, Apple Pay breaks many of the methods retailers use to recognize their most loyal customers.
Overcoming Apple Pay’s Anonymity Challenge
Today’s customer has grown to expect personalization. People choose a favorite sandwich shop not only because they have the best BLT on the block, but they also know their customers’ orders by heart. Consumers want to feel appreciated—and get rewarded—by the retailers with whom they spend the most money.
Most customers know that they submit their personal information to the retailer every time they swipe their credit card. That information is used by retailers to identify their customers and as a result, customers benefit from better merchandise assortments, targeted marketing campaigns and personalized offers that fit in with their shopping preferences and often reward them for their loyalty.
Apple Pay’s tokenization process shields this information from the retailer. To ensure they don’t lose insight into their customer, retailers should employ three tactics that will enable them to maintain customer engagement:
1. Manually collect customer data
Even if Apple Pay makes up a fraction of your transaction volume today, the standard has been set and more anonymous payment methods are sure to come. Make a practice of progressively collecting, verifying and using key customer data at every interaction. When collecting a customer’s name, phone number, email address or postal address, make sure to get permission to use it! You must respect customer wishes and reward the shopper for giving their information to you.
2. Establish a “tender neutral” loyalty program
Loyalty programs provide both a way to collect customer data and to also track purchases over time outside of the payment process. Having a view into customer spend over time is essential to quality customer relationship management, effective marketing and the in-store shopping experience.
3. Encourage customers to buy online and pick up in store
Fortunately for retailers, they still have access to a plethora of consumer data from their e-commerce sites. When a registered user shops online, even without making a purchase, retailers can see their entire shopping journey. Encouraging customers to make a purchase online and pick up the product in store gives retailers the opportunity increase online conversion rates, drive traffic to stores, cross-sell and upsell in store, and combine online and in-store purchases into a single view.
Apple Pay may be responding to public sentiment for a safer way to buy, but the pendulum may have swung a bit too far. When retailers are shielded completely from valuable insight about a shopper’s preferences and relationship to the retailer, the customer experience suffers.
Gregg Aamoth is the co-founder of POPcodes, a cloud-based retail redemption solution that bridges the gap between the virtual and physical shopping experience. POPcodes enables omnichannel retailers to quickly give consumers a seamless and secure way to buy online and pick up in store. Prior to launching POPcodes Gregg spent more than 20 years in retail and financial systems leadership, including 10 years as vice president of customer marketing systems and privacy officer for Macy’s Inc.