Mobile loyalty apps useful, but need finetuning

Demand for loyalty programs integrated into mobile apps growing, but such services need to resolve security, reliability, and usability issues to spur uptake.

Mobile loyalty apps offer both consumers and retailers a win-win value proposition but developers will have to continue working on the app's security, convenience, and reliability before more people start adopting such services.

Aapo Markkanen, senior analyst of devices, applications, and content at ABI Research, said loyalty apps are quickly becoming part of the mix in terms of marketing and retail activities . There is demand for mobile-based, cost-light offerings that allow merchants and service providers to reward their customers, he added.

By integrating loyalty programs into mobile apps, people will not have to worry about losing their loyalty cards or leaving them at home. Smartphones provide a good fit since most users bring these devices everywhere they go, Markkanen noted.

Student Marianne Chua is one who enjoys using these mobile loyalty apps as they save her the trouble of bringing around numerous loyalty cards.

"The cards are too bulky, and I can't live without my smartphone either so this is a win-win situation for me," Chua said.

In fact, should the loyalty service become successful, it might attract the attention of telcos, which view mobile wallets and mobile marketing as an area they could tap on to diversify the low-growth core business of selling voice and messaging services, the ABI Research analyst noted.

Yuta Torisu, communications research analyst at IDC Japan, added with these mobile loyalty apps, telcos would then have subscribers' data that they can use to offer value-added information based on users' location via GPS (global positioning system) and log data.

Overcome usability, security challenges
However, mobile loyalty apps will require more finetuning, Torisu pointed out.

In terms of convenience, for example, he noted the process of downloading the app, choosing the card, authentication, and apps activation are all fairly troublesome. This inconvenience may ultimately cause users to abandon the app, he cautioned.

Marketing executive Olivia Chu was one that was put off by the hassle of signing up for the mobile loyalty service Perx. She said she did not frequent Perx's participating outlets and did not find the service useful. Furthermore, she had to set up another account with the service provider as she did not want to sign in with Facebook and have all Perx-related activities showing up on her News Feed, which she found inconvenient.

The IDC analyst also pointed out since most mobile loyalty apps are provided free, their security levels would be low and cybercriminals may copy and release these apps on online marketplaces to commit fraud, he said.

This risk is particularly relevant for Android users due to the open source nature of the app ecosystem, Torisu added.

On a technical level, Markkanen urged developers to make their offerings reliable and able to work seamlessly with merchants' point-of-sales systems. If they do not, such glitches could easily put off retailers and their customers, he said.