Mobile Private Label Cards

In my last post I wrote about major scheme credit cards (Visa, MasterCard etc.) on mobile phones. But what about private label cards? I believe that mobile private label cards provide  compelling added value to both merchants and cardholders.

From a merchants perspective, at the top of the wish list for such an app is probably a fully branded experience for the shopper. This experience begins with targeted ads before a sale, then to browsing around online or in store, and finally to the conversion and possibly an award for the shopper. For example one really interesting idea I heard recently is a fast food chain funneling customers to lesser frequented stores by providing coupons valid only for these lesser frequented stores. All in real time of course. What a great way to provide a better experience for your client. All the data collected during this process is valuable to the merchant, as it is mostly loyal and top clients that would use such an app. Therefore controlling this data, at least to a certain degree, is an important factor. However, loyalty programs will probably need a fresh approach in order to truly benefit both the merchant and the customer.

I think this is one of the main challenges for major card scheme mobile wallets. Broadly speaking, these wallets are either provided by issuers and offer no benefit to the merchant, or they are provided by larger corporations (Apple, Google, maybe soon by Samsung) who control the data and provide little opportunity for good merchant system integration. The reasons why these big companies are doing this are many.  From rules and regulations to business cases and protecting their best interests. So there is no real benefit for the merchant without a tradeoff.  I wonder if and how Apple Pay will move towards the merchants.

From a personal perspective, I see the convenience and benefits that a wallet with issuer only functionality has. These would be that the wallet contains a card, shows the latest transactions, etc. At this stage though, most of my friends wouldn’t bother with a mobile wallet. Mainly because credit cards are a very simple way of payment that they're already used to. However, if they would benefit from using the app by saving money in one way or another I bet some of them would seriously consider it.  As a side note, my banking app here in Australia provides the option to register a card but when I tried to do this it said that my mobile phone model is not yet supported by the app, even though the phone has a secure element.

Looking at private label cards, a scenario that is beneficial to both the merchant and cardholder becomes much simpler. The reason for this is that private label cards don’t have to adhere to the rules and regulations of the major card schemes. Rules and security controls can therefore be freely chosen by the scheme owner, which is the merchant or a service provider.  Anything is possible, from no rules and security to highly regulated and secure. It would come down to weighing up security, convenience and cost.

For example a merchant could decide to issue a plain text card number as a bar code to each app user, which is relatively insecure. Alternatively, a solution based on tokenization and contactless EMV (NFC) can provide a secure process and seems to be a natural choice, at least here in Australia and in Europe.

By taking control of the payment rules, the merchant or solution provider can focus on creating the desired shopper experience. The actual process of payment becomes just one part of the app, instead of being a major hurdle.

So, will merchants all over the world now implement these kinds of apps? It probably makes more sense for existing players in the market to provide these kinds of solutions and white label them to merchants. I think good APIs and integration points for merchants are, amongst other points, the keys to success. The merchants must be able to keep control of their data.  For example, if you are a PSP and you provide this type of app and service, you will provide true value to the merchant and also increase the merchants dependance on you. I know of several merchants that would love to have private label plastic cards, but have too few potential cardholders to justify the cost of the cards. Making these cards mobile would be a game changer as the cost of card issuance and distribution is significantly lower.  There are some technical challenges to overcome, which we have experience with.

It will be interesting to see how this space will evolve in the near future.  Please contact us if you are interested in the topic, or leave a comment. Thank you.