Why loyalty card usage is plummeting amongst tech savvy shoppers

Recent research from WorldPay revealed that loyalty cards and till receipts may soon be a thing of the past, as millions of tech-savvy UK consumers demand better and more fully integrated shopping experiences.

ITProPortal questioned WorldPay's head of corporate propositions, Geoffrey Barraclough, on how the use of loyalty schemes is changing, and what retailers can do to ensure that they remain relevant.

Are consumers still using loyalty cards?

Nine in ten consumers still use a loyalty card, and 92 per cent use a loyalty scheme at least once a month. However, a remarkable eight million UK shoppers use them less than they did a year ago.

Why are levels of use declining?

Our research into consumer shopping habits reveals some interesting trends around the way we pay today. Shoppers are increasingly conscious of their limited time, often finding that waiting for a till receipt or even taking money out of their pocket takes too much time. Dipping into a wallet to grab a loyalty card may therefore seem like a simple step, but still takes valuable seconds. We're also seeing that many shoppers prefer to use technology, rather than interact with retail staff in person. If this technology doesn't automatically enable the shopper to use their loyalty card, they may be losing out on valuable savings.

Are discounts and rewards still popular though?

Yes, and the importance of claiming discounts and rewards easily and automatically is highlighted by the growth in popularity of cashback cards and discount services. For example, Groupon is now used by one in ten shoppers (11 per cent) and credit card cashback schemes by more than 15 per cent.

How would consumers prefer loyalty schemes to work?

Some 75 per cent would like a loyalty scheme linked to their payment card. Card-linked loyalty schemes and payments would increase usage and the overall customer experience, and ultimately, some consumers would like a unified loyalty scheme across different brands.

Is this likely to happen?

Innovation in this area is being held back by both competition and cost. Synchronised loyalty schemes necessitate collaborative working between different retailers and their partners, and until the benefits of doing so are clear to all parties it's unlikely that there will be rapid change.

What can retailers do to increase usage of their loyalty schemes in the meantime?

Well, 21 per cent of consumers would like loyalty cards to be stored on a smartphone payment app. Exploring this kind of technology might be a good starting point for retailers, as it does not involve collaboration with any other brands, and an app can also be expanded to communicate with customers in additional ways.

Is this important to retailers?

With new legislation on interchange fees reducing the income card issuers have traditionally received, there's a clear commercial incentive for them to maximise the success of their promotions and engage retailers directly, rather than rely on cashback discounts. Loyalty cards also provide vital business intelligence for retailers, and valuable savings for shoppers, so it's critical that they're incorporated into the way consumers pay today.

Are consumers looking to use new technology in other areas as well?

In a further sign of consumers' desire for greater digital integration in their shopping experiences, the research also revealed traditional paper till receipts may soon be on their way out. Younger shoppers are especially keen to see their demise, with 26 per cent of 16-to-24 year-olds wanting to receive vouchers through text and 21 per cent through a mobile app instead. However, more than half of older consumers - those aged 25-64 - would still prefer a paper voucher issued at the till instead.

What are the most popular loyalty cards?

The most popular is the Tesco Clubcard, which our research showed is used by 68 per cent of consumers, followed by the Nectar card at 59 per cent and Boots Advantage Card at 48 per cent.

Where can I find out more about the research?

The full report is available online: "Optimising your OmniPayments: Consumers, payments and the future"

What is your expertise in this area?

WorldPay processes over eight billion transactions annually to the tune over £3 billion. Within the UK, it processes payments for a number of well-known brands and processes almost half of all face-to-face payment card transactions on the UK High Street.

We offer payment and risk services across the entire payment value chain including acquiring, gateway, alternative payments, risk management, and mobile payments. We give businesses of all sizes the ability to accept credit and debit card payments face-to-face, by phone or online. Our online payment gateways cater for over 200 payment methods in 115 currencies.

Geoffrey Barraclough is head of corporate propositions at WorldPay, a major player in the payments processing market, focusing on reducing the hassle of taking money with cards by simplifying the interactions between till, card machine and bank.