Credit Scores and Reports

Mobile wallet providers roll out rewards


Incentives offered to get more consumers to pay by phone

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Mobile wallets roll out rewards


Credit card perks are plentiful now, but your smartphone may hold the key to an even bigger rewards windfall.

A handful of mobile payment providers are rolling out their own rewards programs, allowing credit card users to stack more points on top of what their cards already provide.

For example, Samsung phone users can earn points to buy the tech giant’s products and use credit card rewards to buy complementary products, and vice versa. Coffee drinkers can get rewards through the Starbucks mobile payment app and can save even more by using cash back credit cards stored in their mobile wallets.

Paying with your phone is still a relatively new concept, and mobile payments have failed to take off as quickly expected. Last year, eMarketer projected in-store mobile payments would triple in 2016, but that still represents only 0.58 percent of in-store retail sales. Payments processor Cayan reported mobile payments accounted for 0.6 percent of all 2016 Black Friday transactions.

Experts believe better integration of rewards and loyalty points could spur widespread adoption.

“Rewards and incentive programs have always been the holy grail for getting consumers to move to mobile devices for payments,” said Randy Vanderhoof, director of the U.S. Payments Forum. “It’s been the most vexing challenge to try to implement something like that, and so we’ve seen mobile solution providers trying to innovate around mobile offers and incorporate it into their solutions. We’re going to continue to see that for the foreseeable future.”

Rewards and incentive programs have always been the holy grail for getting consumers to move to mobile devices for payments.

\u2014 Randy Vanderhoof
Director, U.S. Payments Forum

Mobile payments? Consumers wary, unmotivated
Mobile payment providers face an uphill climb in getting consumers to change their habits. Data from consulting firm Accenture show that while consumers are becoming more aware of mobile payment options, they aren’t quite ready to ditch their credit cards in favor of paying with their smartphones. The firm reported in its October 2016 North America Consumer Digital Payments Survey that credit card use grew by 3 percentage points to 53 percent year-over-year, while mobile payments held steady at 19 percent. Meanwhile, consumer awareness of mobile payments increased 4 percentage points to 56 percent.

Security is a concern for consumers – 21 percent said they prefer not to register payment credentials into their phones, while 19 percent fear paying with mobile could lead to unauthorized transactions.

But the biggest barrier to mobile is that it doesn’t offer a strong incentive to switch from tried-and-true payment methods such as cash and cards.

“People are used to paying with plastic and, in some cases, paper,” said Jonathan Magder, senior manager at Accenture Strategy-Financial Services. “There’s no compelling reason to switch.”

One merchant, however, is proving that consumers can rapidly shift to mobile pay when it offers convenience and provides incentives. In September 2015, Starbucks announced a redesigned mobile app to allow customers to order and pay for their drinks before they get to the store. The coffee chain upgraded the app again in April to allow users to redeem their rewards and other offers using the mobile order-and-pay feature.

The app accounted for 25 percent of the chain’s in-store purchases in the third quarter of 2016.The mobile order-and-pay feature alone contributed to 6 percent of Starbucks’ quarterly U.S. sales.

“It’s phenomenally well done,” Magder said of Starbucks’ app. “You don’t have to carry a separate Starbucks card because you know no matter what store you go to, it’s going to work on your phone.”

Others have followed Starbucks’ lead. In November 2016, the Coffee Bean and Tea Leaf launched an app allowing customers to store their loyalty points and pay with their phones at the point of sale. Whataburger’s new app also delivers rewards and allows mobile payments, and it will enable mobile ordering next year.

Double-dip for points
Tech firms and big banks are making strides in the mobile rewards game as well. Payments provider Blackhawk Network announced in December 2016 it would integrate rewards programs and loyalty points from participating merchants into Apple Pay. Samsung Pay in November 2016 unveiled a new rewards program that allows Samsung smartphone users to earn points with every mobile purchase they make. Users can redeem points for Samsung products, vouchers for the company’s website and retail gift cards. Rewards also can be redeemed toward a Samsung-branded Visa prepaid card.

In a news release, Samsung touted the fact that its rewards system allows credit card users to “double dip” – earning rewards on top of the points or cash back they already get from the cards they store and pay with in their mobile wallets.

Meanwhile, Chase announced in September 2016 that Best Buy signed on to accept the bank’s new mobile payment system at the retailer’s 1,400 U.S. stores. Chase said in a press release it would integrate “offers and rewards into the payment experience to deliver a seamless experience at the point of sale.” Chase has not yet specified whether that refers to its own credit card rewards, Best Buy’s long-standing customer rewards program or some combination of both. The bank officially rolled out its new Chase Pay app, which can be used at Starbucks and Best Buy, in late November.

It’s clear that we already have an abundance of choices when it comes to mobile payment solutions. While confusion and redundancy could be short-term stumbling blocks, healthy competition among payment providers will benefit shoppers.

“Eventually consumers will align around one or a few of these mobile schemes, but right now it’s the wild, wild West,” Vanderhoof said. “Everyone’s experimenting, and we’ll see which of them rises to the best of class. It’s too early to put any bets on one provider.”

Use your virtual wallet to fatten your real one
If you’re content to continue paying with plastic and paper, you’re still in the majority – but you risk leaving money on the table. Here are some ways you can save by paying with your phone.

  • Stuff your mobile wallet with rewards and cash back credit cards.
    If you own a smartphone, add the cards that offer the best perks to your Apple Pay, Samsung Pay, Android Pay or other mobile wallet, and let any nonreward cards remain in the physical realm. Mobile wallets typically allow you to switch cards with just a few screen taps, so you can easily select the best rewards card based on the type of purchase you’re making.
  • Take advantage of mobile pay incentives.
    Samsung Pay now offers Chase cardholders $15 in rewards in return for making three mobile purchases by the end of 2016. There are also limited-time offers of $5 in rewards for first-time purchases and for referring a friend to Samsung Pay.
  • Make mobile-friendly shopping your routine.
    Seek out stores that accept mobile payments at the register, and use mobile pay as much as you can. Apple and Android have online lists of places where you can pay with mobile, while the Samsung Pay website contains the vague promise that it “works almost anywhere.” All three mobile pay providers offer special discounts when you pay with your phone at select merchants and retailers.

More reward programs tied to mobile are sure to be introduced as the current ones gain in popularity. Embracing them now is a good saving strategy and an excellent way to ease into what could be a very different payments landscape within a few years.

See related: No card, no problem: Pay with your ring, watch, bracelet, Security concerns keeping consumers away from mobile payments

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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