Modern Digital Clearing Brings Efficiency, Rapid Reimbursement to Old-Fashioned Coupon Biz

Couponing clipping remains something consumers do, as the sector still relies heavily on paper, making it one of the most friction-filled ways of getting a discount. So technology is stepping in to save the coupon from itself.

Brands and retailers want to bring couponing into the digital connected economy, clip the processing inefficiencies, and make the whole thing a money-saving proposition for everyone. Digging into that idea, Sylvain Mansier, general manager of payments at Inmar Intelligence, told PYMNTS that advances in electronic clearing are transforming the space.

“It’s not something many of us think about a lot, but [coupons are] used hundreds of millions of times per year and represent billions and billions of dollars of commerce,” he said. “Electronic clearing is really about how … we streamline the process of getting retailers reimbursed when manufacturers or brands put coupons out in the market for consumers to use.”

In other words, “If you buy a box of Cheerios from your local grocery store, that grocery store gives you a dollar off. They need to get that dollar back from General Mills.”

To make that work as easily as Mansier explained it, coupons have some catching up to do. Companies including Inmar are working to bring digital precision to what is still an awkward process on the back end for brands and merchants issuing coupons.

“The way it’s done today requires physically shipping coupons for processing,” he said. “What we’re talking about is finding a way and having the technology in place where we can electronically clear transactions, meaning validate them and remit funds back to a retailer.”

See also: Retailers Test Discounting, No-Return Policies to Keep Goods With Consumers

Saving Coupons From Themselves

Digitization makes the clearing process simpler and more seamless — and it gives stores and manufacturers access to reams of consumer data. That last bit is important because paper coupons are a wasted opportunity when it comes to the useful data that redemptions generate about consumers and the discounts they value most.

“If you use a paper coupon today, I don’t know where that came from,” Mansier said. “All I know is some retailer got it at some point of time. But if I’m doing electronic clearing, I can attach that to the metadata around the transaction. That’s what I don’t want folks to lose out on.”

Tens of thousands of point-of-sale (POS) terminals in the field today are built to spit out two yards worth of paper coupons, vividly illustrating this part of the issue. But it’s a bit deceiving.

Printing coupons at the register is a way for companies to collect information about their customers, Mansier explained. Each one of them represents targeted offers aimed at figuring out what sort of promotional mix will appeal to a certain consumer so retailers can optimize their investments.

But Mansier argued that the process could use a bit of refining — and that involves getting electronic clearing into the digital road maps of more merchants, which haven’t historically placed couponing technology high on their list of technology priorities, he said.

Working with Inmar, “We make it as low lift and cost effective as possible,” Mansier said.

“It’s not necessarily a big cost, but it requires some resources on the technical side at a retailer to make this happen,” he added.

As for the right now, the pandemic may withdraw, but paper will be around for a while longer. That’s an issue for retailers as paper coupon economics are deteriorating in the digital shift.

As there is this shift to digital offers, the cost and burden of managing the settlement of paper coupons goes up as the volumes go down.

Merchants need to accelerate adoption of digital clearing tools, Mansier argued, because paper coupons are simply too valuable to do away with.

“If we can’t manage the cost of validation and settlement of those offers, the costs to do that are going to start dwarfing the economics,” he said. “It’s going to have to happen that we invest in electronic clearing to preserve this really useful tool for brands to market to consumers.”

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Catching Coupon Fraud

Noting $100 million in estimated paper coupon fraud equates to roughly 5% of consumer spend on discounted items, Mansier said that money ends up getting cut from marketing budgets, adding insult to injury for the retailer that’s been swindled and now can’t do that next promo.

Pointing to the difficulties retail cashiers can have telling real coupons from fake, Mansier said technology from Inmar and other providers allows cashiers to validate a coupon in real time at the POS.

“When you scan the coupon, we’ll give a message back to the cashier via their point-of-sale system in real time [saying], ‘This is valid, you should accept it,’ or, ‘It’s not valid,’” he said.

Complicating matters further is when redemptions are not truly eligible. This is another hard-to-parse area of couponing where electronic clearance is clearing things up.

“Our technology can validate that purchase requirements have been met,” Mansier said. “That’s another way we can ensure that manufacturers who are investing in these price promotions are realizing the highest return on their promotions investments.”

Blame laggards of the great digital shift for the paper tiger that still menaces coupons.

Also understand that paper is hard to part with. While fraud at the POS has gotten harder to pull off for fraudsters when it comes to EMV chip cards and even counterfeit cash, paper coupons are hanging on because people use them. But those days are numbered.

“From a targeting standpoint, as sort of passé as paper is, it can be efficient,” Mansier said. “The downside is it’s hard to put controls and validations when it’s done in print.”

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