For decades now, the banking industry has faced pressure to offset growing expenses with new revenue streams. The challenge of late has been to charge fees to customers for only value-added services, rather than as penalties. To do this, banks must branch away from traditional financial services and become more involved with the consumer channels that touch finance but may not be traditionally operated by a bank. As the digitally-minded millennials make up a larger share of the shopping base, the retail and dining industries grow ripe for transformation.
Card-issuing banks can build new revenue streams in the retail and dining realm by leveraging two assets inherent to the financial services industry: relationships and information. These assets are surprisingly valuable in the retail industry, especially with regards to the payment and receipting processes at checkout. While broad adoption of digital payments is reliant on merchants’ capacity to upgrade their point-of-sale (POS) systems, there is far less complexity involved in the digitization of receipts.
While some merchants have leveraged e-mail as a form of receipting, few have seen broad-scale adoption due to the need for customers to first provide an e-mail address. As owners of both the customer’s information and the relationship with the customer, banks and card issuers are put in a very powerful position at the checkout counter. What better way for banks to monetize this proximity to the customer and increasing overall brand engagement than becoming the customer’s platform for digital receipts?
Banks’ relationship with their customers can be leveraged for a wealth of use cases in digital receipting. One that addresses a real opportunity today for both merchants and customers sits with loyalty – in particular, facilitating loyalty program enrollment. The process is fraught with tension as customers are burdened by exhaustive registration forms or awkward verbal exchanges with the cashier. With even regular customers reluctant to enroll in programs during checkout, merchants are looking for ways to automate or simplify this process.
Banks can be the unlikely player that makes the enrollment process easier, being the only party guaranteed to maintain a relationship with the customer after a purchase is made. They can play the ‘gateway’ role in loyalty program on-boarding, using basic customer data that’s already on-hand to facilitate enrollment – while still allowing merchants to maintain control over future marketing and promotion.
So, logistically speaking, how would this work? Card issuers that provide their mobile app users with real-time push notifications have unknowingly laid the groundwork for a seamless loyalty program enrollment platform. While mostly used for fraud detection today, the real-time push notification can take the form of a digital receipt as a purchase is made and then proxy for the program’s registration form. If the customer wishes to opt into the loyalty program, one touch on the digital receipt triggers the provision of basic customer data to the merchant.
Banks take the driver’s seat in this process because, more often than not, the customer already has his or her bank mobile app installed on their smartphone and not the merchant’s. The bank already has the relationship with the consumer – one that has potential to be shared with the merchant rather than the current scenario that often ends with customers leaving retail stores still as strangers. To profit from this role, the bank would charge merchants a fee for every customer registered in their loyalty program and then for certain spending thresholds met by the customer thereafter.
Banks contain a large inventory of information about their customers, far beyond what is needed for loyalty program enrollment. Banks can act on this valuable supply by using digital receipts to increase consumer transparency into spend. This starts in a domain that has been particularly unpopular with consumers to-date: personal financial management (PFM).
Banks can marry transactional data from retail purchases with account balances to help drive better decision making on the part of the consumer. For example, digital receipts can allow consumers to categorize spend for budgeting purposes immediately after a purchase is made. This capability helps enable real-time financial feedback (i.e. over-budget on Fast Food in December) that requires little to no work on the part of the consumer. This type of functionality is already being delivered by many neobanks within their mobile apps and can be monetized if consumers become dependent on it for financial well-being.
To add an element of fun to the receipt, banks can share details related to their credit card rewards programs. Receipts should include a snapshot of the number of credit card points and rewards earned by the customer on the purchase. Providing customers with the sense that their purchases serve as credits for unlocking a reward can result in more card swipes or higher transaction volumes. The tactic of displaying this information on the receipt allows customers to visualize what their purchase has earned them and helps reinforce loyalty to the card issuer.
Down the road, banks may be able to influence developments in POS systems that would bring itemized (SKU-level) transaction data to the digital receipt. In addition to potentially bridging loyalty and PFM with payments, this would allow the banks, as stewards of the transaction data, to provide even greater insights and value-added services to their customers. Some examples include: comparisons of prices paid for razor blades purchased at the pharmacy versus online and restaurant recommendations based on the frequency of transactions that include tacos when dining out.
The list of digital receipting use cases continues beyond loyalty and spend transparency – banks may also consider incorporating social media and other plug-ins as well. However, no matter the use case, banks must balance capability with ease of use and privacy. In other words, they will need to ensure that customer data is used responsibly and for services that ultimately benefit their customers.
The question to banks and card issuers is this: why not profit off of assets that are already innate to the financial services industry? While merchants continue to push marketing through static e-mail receipts, banks can leverage two of their greatest assets and begin to disintermediate the checkout portion of the retail channel. The reward could be lucrative both from a monetary perspective and as well as ultimately being viewed as a key companion by the customer during their everyday retail and dining experiences.
Mike Davidsen, Senior Associate Customer and Operations Advisory, KPMG in the US