The Ultimate Marriage Between EMV and Loyalty

One of the very interesting and potentially most talked about challenges in payments is whether a standardized approach can be developed for seamless handling of loyalty programs when making POS payments, all as part of the same transaction and using any type of EMV compatible form factor, including payments with plastic EMV cards, NFC wearables and/or mobile phones.

Do cardholders need to carry and swipe/scan separate loyalty cards or be required to collect and present coupons during payments? Some feel embarrassed by publicly handing coupons, while others purely hate inefficiencies during checkout. Do Issuers need to limit themselves to co-branded cards, i.e., be hardwired to a specific loyalty program? Can card Issuers be provided with ultimate flexibility to dynamically partner with as many various loyalty program providers and also offer their cardholders convenience of choosing which of the available loyalty programs they wish to participate in and ‘attach’ to their payment card account just by using their mobile phones? Can cardholders be simply notified on their mobile devices to review and eventually accept available coupons, ahead of the POS transaction and then use those coupons seamlessly, invisibly and automatically, depending on the transaction context, i.e., based on at which merchant they transact at the moment?

In my opinion, the ideal checkout experience shall be just a simple payment device tap or insert. During payments, loyalty should be virtually invisible, except on the final receipt, for customer awareness. Can such a loyalty program’s integration between Issuers and partnering loyalty program service providers be achieved in a standardized way, without impacting the integrity of existing payment processing, i.e., without requirements for costly changes in the current EMV compliant POS, acquirer and payment network systems?

Assuming that each of the loyalty program service providers would still require its own separate loyalty identifier and proprietary APIs, is it possible to eliminate the requirements for Issuers to handle multiple separate loyalty identifiers and APIs as part of their loyalty integration? Ideally, an issuer shall only interface with a loyalty integrator using single and issuer-specific/unique-per-card ‘loyalty identifier,’ which is decoupled from all of the loyalty identifiers specific to each of the available loyalty programs. That would allow Issuers to be isolated from complexities and nuances of the real loyalty integration and processing behind the scenes.

Any loyalty program identifier shall also be decoupled from the payment device’s PAN to prevent any potential compromise of the sensitive payment card credentials during integrated payments and loyalty processing. That would enable the aspiring loyalty integrators to provide the cost effective service by being able to operate without incurring expensive PCI DSS-compliance costs.

I strongly believe and feel that there is no need for carrying and swiping separate loyalty cards or be burdened with coupon collection and presentment at POS anymore. Eliminating the separate handling of loyalty cards and coupons at POS would improve speed and efficiency of checkout and reduce checkout lane queues, plus it would significantly increase consumer satisfaction and improve customer loyalty to their favorite retailers and card Issuers.

The good news for the industry is that the existing EMV standard already has everything in place that allows card Issuers to provision unique generic single ‘decoupled loyalty identifier’ into any EMV payment device (at the time of issuance), regardless of the form factor and to transport it transparently throughout the EMV payment rails, as part of the single EMV payment transaction. That greatly simplifies handling of the loyalty information at the POS, i.e., has the potential to make it virtually invisible to the POS, merchant and consumer.

Once the issuer host receives the regular payment authorization request carrying the payment card unique ‘decoupled loyalty identifier,’ it would extract it and hand it over, together with the merchant ID, to the loyalty integrator interface. The loyalty service integrator would then recognize whether the merchant ID currently offers any loyalty program, whether the current ‘decoupled loyalty identifier’ is subscribed to that particular loyalty program, plus whether there are any coupons or loyalty offers pending and accepted by the cardholder for the identified loyalty program.

Based on the results of the loyalty account validations, the loyalty integrator translates the issuer’s generic ‘decoupled loyalty identifier’ to the loyalty program service provider’s real loyalty identifier and prepares/submits the final loyalty transaction message to the proprietary loyalty program service provider API interface for final loyalty processing. This could be loyalty point collection, coupon processing or using the collected loyalty points for paying for a portion or the whole transaction amount.

As can be seen from the previous description, the EMV’s ability to seamlessly transport the ‘decoupled loyalty identifier’ as part of the single EMV payment transaction can creatively be utilized as the key enabler for (long overdue) standardization and seamless backend integration of payment and loyalty processing between issuers and loyalty Program service providers, via simple and standard loyalty integrator interface. Even better, it can be fully independent of the underlying EMV form factors and will not impose requirements for POS, acquirer and payment network system changes.

Milos Dunjic

Milos Dunjic** **is a technology executive fascinated with and focused on payments innovation. He currently leads and is responsible for TD Bank’s Payments Innovation practice. All opinions are purely his own and not of his past and current employers.

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