How Mobile Card Services Turn Location Into Loyalty

In real estate, the mantra goes: It’s location, location, location. In commerce and loyalty programs, though, location matters, too.

For financial institutions (FIs) and merchants, the opportunity is there to harness technology and mobile card services to drive sales up, drive fraud down and cement long-lasting relationships with consumers.

In an interview with Karen Webster, Vaduvur Bharghavan (VB), president and CEO of Ondot Systems, noted that his firm has seen at least some embrace of mobile card services. Based on empirical data across several banks (“we do this on a periodic basis,” he told Webster), as much as 15 percent of cards may be “turned off” from those services. However, of those who do opt to use those service options, about 30 percent have set controls on transaction amounts or monthly spend.

Here’s another data point on offer from the executive: “By far, the highest number of the fraction of controls [used] is location-based. It’s over 70 percent.”

Since Ondot launched such location-based offerings — the company’s solutions enable FIs to help consumers control each card separately, set maps where they can be used and set transaction limits — in 2015, they’ve been the dominant set of features used, especially among safety-oriented consumers.

A Proactive Mindset

Increased adoption could be spurred by a proactive mindset on the part of FIs, he said. Rather than let consumers “accidentally stumble” across the offerings, they could make mobile card services front and center right when the consumers download the apps, especially in a setting where card-focused and banking apps are decoupled.

VB listed key points that matter for extracting value in location-based services: “I want my card to ‘follow’ me so I can use it where I am. I want to get offers … where they matter, based on where I am, and based on my past purchase history. And when I see transaction details, it should be clear where I have made purchases.”

Picture, then, prompts that span all of the above, which might ask users if they’d like to enable location settings on their cards, with the explanation that a key benefit exists with such an opt-in — namely, as VB said, “that the card works where you are — and we’ve made sure it does not work where you are not.”

With such an option in place, he said, the consumer effectively becomes part of the FI’s fraud team.

The adoption of location-focused card controls has clear advantages for both FIs and consumers in battling the bad guys, resulting in lower incident rates of fraud, reduced false declines and even a reduced number of calls to banks’ service departments. Those positive outcomes, he said, come alongside a greater illumination of transaction and merchant details, such as names, mapped locations and contact information — all enabled through location controls.

Beyond The Anti-Fraud Benefits

Moving beyond even the fraud-fighting benefits, there are benefits that accrue to the commerce ecosystem as a whole, whether transactions are done online or in-store. As Webster noted, when consumers enable location-based services, check transactions or even make payments, there’s an opportunity (seldom taken) to prompt those consumers to check out new features, and opt in to relevant merchant offers. Enabling offers at the point of onboarding ultimately benefits consumers, FIs and merchants.

As VB said, card companies and merchants can work together to present offers and promotions that are relevant to a consumer at that minute, wherever they are. After all, merchants want to garner as much foot traffic as possible.

One other bit of value to be gleaned: The offers should be presented before a consumer has made a purchase, not after. Gone, then, would be the endless rolls of receipts that spin out at the POS with offers for the next visit, only to be tossed aside, stuffed into drawers or trashed.

The ability to target on-site and on time carries a wrinkle, he said: The offers are based on proximity, but can take into account whether a consumer is walking or driving (through the use of geolocation services). Context, after all, matters a lot in commerce. Geolocation is not just for tracking and mapping, but being brought into a “proactive offer domain,” he told Webster. That can benefit mid-tiered FIs with debit or credit cards that may not necessarily be top of wallet.

The entire payments ecosystem may be missing out on a virtuous cycle, which could be realized if consumers would only look beyond fraud controls. Consumers may not be looking to their banks for offers in tandem with warehouses such as Groupon. Taken together, though, he said, “mobile and location services bring a whole new set of opportunities for offers and consumers to be brought together around a platform that provides that.”