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by Mike Fletcher, InComm Digital Solutions | January 05, 2015
By building digital gift card reward programs that expand upon existing physical card initiatives, loyalty and incentive companies can make life more convenient for consumers, decrease costs, and increase the stickiness of loyalty programs. The less expensive fulfillment cost of digital cards makes it easy to start and stop a wide variety of short-term and small denomination promotions. The flexibility of digital gift cards makes it easy to offer rewards in variable denominations so that consumers can redeem the full value of their points at the time they want. In the future, mobile wallets and apps will enable reward companies to use digital gift cards to take mobile and digital consumer engagement to the next level. 

In fact, as mobile wallets take hold, they will become the go-to place for consumers to store value and complete all sorts of everyday transactions, from buying lunch to paying for the bus. When loyalty and incentives companies own their own mobile wallets, they'll also make it easy for consumers to redeem loyalty points for rewards. Just as online sites replaced paper catalogs full of rewards, mobile wallets, powered by the flexibility of digital gift cards, will eventually replace online point redemption portals in popularity. Mobile wallets will make it easier than ever to reward consumers in real time as they shop, thereby further increasing customer engagement and loyalty program stickiness. 

Loyalty and incentive companies should take note: Without a strong and complete mobile strategy in place, they risk falling behind. 

Here are three key ways that digital gift cards and mobile wallets will change the game for loyalty and incentive providers:
 
1. The Ability to Merge Cards. The most engaged customers earn the most rewards, which sometimes means that a loyalty company's most engaged and valued customers end up with a mix of plastic cards of varying amounts. As consumers spend those rewards, their wallets become weighed down with cards that carry odd amounts -- such as $17.26 on one card and $9.08 on another. Actually paying with these cards means searching for and keeping track of an ever-growing bevy of odd-valued cards -- and remembering to use them.

While it is possible to merge the value held on several physical cards onto a single card, it is uncommon in practice. Customers need to visit a store or call a card provider in order to merge the value. With a mobile wallet, consumers can upload and convert plastic gift cards to digital, then quickly and easily merge the digital card balances. There's no hassle of visiting a store, there's never any doubt about how much money shoppers have available to spend, and it's much easier for customers to spend the full value of their rewards.

2. Redeeming Points Instantly and Adding Value to Existing Cards. The ability to earn and redeem points for digital gift cards on mobile devices is already offered by some mobile wallets and apps. Consumers can earn and redeem points by making a purchase, participating in a promotion, and through numerous other ways. Once customers earn points, the redemption process is immediate: They simply go to the app and turn the points into rewards. 

Loyalty and incentive companies who own their own mobile wallets or apps and deploy them as part of a comprehensive mobile strategy will be able to increase loyalty by speeding the process from earning points to redeeming points. 

For example, an incentive company can send a customer an email alerting them that they have points they can redeem for a reward. Instead of redeeming points for a physical gift card and waiting to receive one in the mail, users can redeem their points in a loyalty-owned mobile app, select a digital gift card as a reward, store it in their wallet, and apply it to a purchase instantly-all with a few taps of the finger. Points can just as easily be applied to a new digital gift card or added to an existing card-all in real-time.  Consumers will be able to earn points on their morning grocery shopping that they can redeem and add to an existing card already in their mobile wallet and use it to pay for dinner in the evening.

3. GPS-Powered Real-Time Rewards and In-Store Notifications. It can take days or even a couple of weeks for consumers to receive rewards in the form of physical gift cards, leaving a lengthy gap between when the customer earns the reward and spends the reward. This gap can lead to a drag on engagement and increase the risk that customers will not bother with redeeming points they've earned. 

What geo-notification powered mobile wallets will do is nudge loyalty customers to use points as a payment system when they are needed. Mobile wallets with geo-notification enabled will not only store a customer's points and digital gift cards, but will also notify customers to remind them that they have stored value they can apply to a purchase. Loyalty and incentives companies who can position themselves right in their consumers' pockets will capitalize on the immediacy of smartphones and stand to drive higher than ever levels of engagement.

Taking Incentives Programs to the Next Level: Now
For loyalty and incentives companies to truly unlock the power of mobile, the key is both to own the mobile wallet and to incorporate points redemption into a mobile strategy. Digital gift cards have long been a component of incentives programs, and adding the ability to merge cards, add value to cards, and notify customers that they have value to spend all from the same platform will give loyalty and incentives companies the ability to also own the customer-and to offer a whole new array of promotions and offers. Deploying a loyalty-owned mobile wallet will also help keep loyalty and incentive programs top of mind for consumers, which helps keep customers engaged and less likely to take their business to a competing loyalty program. With mobile wallets poised to take loyalty programs to the next level very soon, the time to stop dabbling and start thinking seriously about points redemption and mobile wallets is now.

Mike Fletcher is general manager at InComm Digital Solutions, the team that provides digital and mobile e-gifting technologies for InComm Digital Solutions. InComm Digital Solutions is a point-of-sale (POS) technology and incentive gift card provider that studies consumer behavior around mobile gift cards, and how incentive programs can make the best use of them.