A short history of wallet apps

The history of digital wallets may seem like a small part of the big picture of money's evolution, but it's a pretty intriguing one. The development of secure contactless payments through mobile devices was made possible by NFC (near-field communication) technology, a radio-based method of transmitting data from a short distance. Other milestone moments include the launch of Apple Pay in 2014 and the debut of Android Pay in 2015, marking the premieres of the most popular mobile payment apps.

But the idea of moving our entire wallets onto our phones had been brewing in the minds of Silicon Valley's tech titans earlier on. In 2011, Google rolled out Google Wallet, an app that brought together payment cards (without NFC), loyalty cards, and promotions. Then, in 2012, Apple introduced Passbook, a digital hub for loyalty cards and ticket storage.

Fast-forward to today, and we've got Apple Wallet (available since 2015) and Google Wallet (since 2022 – it's a different app from the 2011 Google Wallet). Let's not forget Samsung's contribution, Samsung Wallet, which evolved from the Samsung Pay app in 2022.

From payments to Swiss Army knives

Originally, wallet apps were created with the singular purpose of simplifying card payments. However, their evolution has been nothing short of remarkable, expanding their repertoire far beyond basic transactions. Today, these apps serve as dynamic digital hubs, offering a plethora of functionalities.

For example, they can serve as virtual keys for certain models of new cars, enhancing convenience and integration into everyday life. Additionally, major players like Google and Apple have expanded their capabilities by aggregating transportation tickets and event passes, consolidating digital experiences into a single platform. In the USA, these apps even allow users to add identity documents, mirroring features found in Poland's mObywatel.

With such diverse capabilities, wallet apps serve as effective alternatives to traditional wallets, offering convenience befitting the digital age.

Wallets and loyalty programs

Both Apple and Google predominantly rely on the so-called passes for their wallet integrations. These serve as digital versions of cards that were previously issued in paper (such as airplane tickets) or plastic (like club membership cards).

The pass integration format also comes in handy for loyalty programs, which make use of customer codes or plastic cards. This allows users to conveniently scan their customer code while shopping in-store. Furthermore, the virtual card can display information about the current points balance or other helpful details, which isn't feasible with traditional physical cards.

From the customer's standpoint, syncing the wallet with the loyalty program is straightforward and requires just one click:

Furthermore, Google also lets users manually add a loyalty card to their digital wallet and store it digitally. All a customer needs to do is scan the barcode – it works seamlessly even for loyalty programs that lack integration with wallet apps.

On the other hand, Apple goes the extra mile, offering its users a much simpler enrollment process for loyalty programs.

Is Apple trying to replace loyalty mobile apps?

Typically, signing up for loyalty programs requires users to fill out forms, use mobile apps, or register in-store.

Apple's solution, called Point of Sale, simplifies this process by allowing automatic enrollment in a loyalty program with just two clicks, without the need to download the brand's app. However, it's important to note that this feature currently only works in a phygital environment, meaning it can be used during in-store Apple Pay contactless payments.

The enrollment process itself is quick, easy, and secure. What's more, it all happens directly on the iPhone screen. After finalizing the Apple Pay contactless payment, the customer automatically receives a notification on their phone inviting them to the loyalty program and offering enrollment, with the program retrieving the user's data. Upon accepting the program's terms, the loyalty card is automatically added to Apple Wallet, and the whole process takes literally a few seconds.

The Point of Sale feature doesn't just stop at convenience; it goes one step further. If you've got a loyalty card tucked into your Apple Wallet, it's a breeze to use it – it kicks in automatically. While you're busy paying with Apple Pay in the store, your loyalty points get added without you even lifting a finger. So, even if you're the forgetful type, you're still earning those points.

Moreover, with just two clicks, users can check available discounts and redeem them while shopping. Using the loyalty card at the in-store terminal also allows registering the customer’s visit and provides the staff access to account information.

Integrating loyalty programs with wallet apps

Implementing integration of a pass-type loyalty program (meaning a virtual customer card in the wallet) is relatively simple and quick. Integration can be done using in-house developer resources or by utilizing services from so-called pass providers who offer ready-made solutions for easy creation of such cards.

However, to implement a point of sales integration (providing automatic enrollment into the loyalty program during Apple Pay payments in a physical store), it's crucial to ensure the following:

• Obtain an NFC certificate and verify that the digital loyalty card is certified for contactless payment processing.
• Introduce certified payment terminals and card readers – it's imperative to have compatible payment terminals in physical stores that accept Apple Pay and hold VAS (Value-Added Services) certification.
• Implement point-of-sale software – it needs to be tailored to seamlessly facilitate immediate enrollment into the loyalty program. It should be capable of integrating with both the contactless loyalty card and a specialized payment terminal.

Currently, the solution described above is only available in the USA and specifically caters to in-store purchases. Therefore, it doesn't extend to online purchases and payments.

Are digital wallets a real alternative to loyalty mobile apps?

Integrating a loyalty program with Apple or Google Wallet undoubtedly brings numerous business benefits, including:

• Increased user retention
• Increased frequency of purchases
• Increased enrollment in loyalty programs
• Increased frequency of scanning the digital card
• Expanded marketing reach
• Possibility to share cards with other users

Before jumping into integration, it's crucial to ensure that the solution aligns with the specific needs of the brand's loyalty program. Integrating with pass-type solutions makes the most sense for programs centered around collecting points or scanning apps. This streamlined integration makes it much easier for users to scan their code regularly during purchases.

However, the scenario shifts for loyalty programs that involve more than mere card scanning, like when users need to manually activate coupons. In such cases, users are prompted to visit the brand's app regularly and as frequently as possible. Consequently, integrating with a wallet app might not yield the expected outcomes.

On the other hand, despite the many benefits offered to customers, the Apple Point of Sale integration remains more of a novelty for us to observe from afar. This solution is currently limited to offline payments and iOS devices.

Given the present capabilities of wallet apps and their integration with loyalty programs, they don't quite present a genuine alternative to brand loyalty mobile apps just yet. Nonetheless, such integration could offer a valuable enhancement to a loyalty program, potentially amplifying purchase frequency.

What lies ahead? Considering the trajectory of tech giants like Apple and Google, it's entirely plausible that wallet app integrations could become standard features of loyalty programs in the future.