Mobile Banking Moves to the Point of Sale with Consumer Incentives

As mobile banking spreads to more banks, the companies that enable the service are getting ready to bring it to the merchant point of sale, along with a bevy of incentives to induce consumers to buy. The move, say some, stems from the recognition that if banks simply enroll online-banking customers in mobile banking, their inability to charge for funds transfers and bill payments on PCs will carry over to the handset-based product. “Internet banking is nothing but a cost center,” says Kyle Cochran, director of product management for Atlanta-based Firethorn Holdings LLC, a unit of phone-chip vendor Qualcomm Inc. “It's fantastic to the customer, but just a cost center to the bank.” Earlier this month, Firethorn introduced a version of its mobile-banking application that will allow merchants to send offers to bank customers' handsets. A restaurant, for example, will be able to notify a user searching for a place to eat that discounts are available on appetizers. Cochran won't give details about the effort, but says a sales team formed to call on merchants is “in coversations” with a number of them. In a bid to tie banks' credit and debit cards into mobile rewards and incentives, Novato, Calif-based ClairMail Inc. next year will introduce a service it calls “Free Money.” The service, which relies on the two-way messaging system undergirding ClairMail's mobile-banking product, will allow consumers to receive money back on purchases based on their recent behavior if they use their bank-issued credit or debit cards. For example, a mobile-banking user who recently bought a cup of coffee might receive a text message offering a credit against another coffee product at the same store, or a competing coffee emporium might send an offer to try its products. The incentive amount, which would be good for a limited time, would be credited against the card transaction, and the consumer would receive a confirming text message as soon as the transaction is complete. “You need to know before you walk out the door that you got your credit,” says Joseph H. Salesky, chief executive at ClairMail. In the background, what ClairMail calls its Eventing Engine collects card-transaction data from its client banks, which issue the cards and also hold the merchant accounts. This allows ClairMail to track consumer behavior and also match up transactions with specific offers. Merchants would fund the incentive amounts as well as pay the banks what ClairMail calls a cost per action, or fee, tied to the incentive amount. Cardholders would receive no more than two messages per week. Salesky sees the system influencing consumer behavior in a way that could benefit both banks and stores. “The best way to get you to do something is to pay you to do it,” he notes. “This will get back loyalty to credit and debit cards, the existing transaction mechanisms.” Meanwhile, Visa Inc., too, has introduced a merchant-based offers and rewards capability for its mobile-payments platform. It started a test of the service in August in Phoenix, working with JPMorgan Chase & Co. cardholders. More than 50 merchants were recruited to participate. Part of the idea behind the trend, says Firethorn's Cochran, is to kickstart mobile commerce without relying too heavily on handset-based payments at merchant point-of-sale terminals, which rely on contactless technology and phones with embedded near-field communication (NFC) chips. NFC has been mired in squabbles between banks and wireless carriers over how to share transaction revenues. By using handsets to deliver offers and incentives, Cochran says, “we don't need chips in phones” to make payments occur.