Why payment and banking apps have the potential to completely replace loyalty cards

There are clear trends that loyalty cards will become superfluous in the near future. The industry is struggling with price increases of 100% to 170% when it comes to logistics, materials and services. Digital loyalty cards offer a number of benefits that put traditional plastic cards in the shade. In this article, we take a look at the developments why payment and banking apps have the potential to completely replace loyalty cards.

1. Growing use of mobile wallets

The popularity of banking and wallet apps has increased disproportionately in recent years. More than 2 billion people worldwide use mobile payment & banking apps (Business of Apps Mobile Payments App Revenue and Usage Statistics 2024). The transaction volume of mobile payments reached USD 2.3 trillion in 2023. The use of wallet apps such as Apple Pay, Google Wallet and Samsung Pay has also seen a considerable increase. According to Statista, digital payments such as Apple Pay, PayPal or Alipay are expected to be the fastest growing payment method worldwide (Statista, Mobile payments with digital wallets). These figures show that mobile payment has now reached the middle of the population. Wallets offer consumers the opportunity to pay and are thus increasingly integrating customer cards in order to reduce dependency on customer cards.

2. Customer preference for digital solutions

One of the main incentives for customers to replace cards with digital ones is convenience. People who use a payment or banking app no longer want to carry a (thick) wallet. Digital loyalty cards in payment apps allow consumers to manage all their cards in one place, easily accessible at any time. Switching between the payment function and the customer card is seamless, which speeds up and simplifies the entire checkout process. 
This is an important finding for banks and financial service providers: payment apps that can store digital customer cards benefit from much higher user loyalty, offer users a better overall experience and benefit from the fact that 94% of companies are focusing on customer loyalty in the current economic situation and are increasingly investing in digital customer loyalty programs (Antavo Global Customer Loyalty Report 2023). The banking app is therefore the first place to satisfy this need to securely store customer cards and data.

3. Security creates trust

The integration of digital customer cards is a further step towards fully digital financial solutions. For financial institutions, this offers the opportunity to position themselves as an innovative and modern service provider that offers its customers advanced and convenient solutions.  Customer cards can easily be lost or stolen. Digital loyalty cards in banking apps, on the other hand, use security mechanisms such as encryption and two-factor authentication to protect access. This strengthens trust in the payment app, which further increases user loyalty. Retail groups, on the other hand, find it difficult to offer these security standards to consumers, as the marketing needs of the company must be taken into account first and foremost. 

4. Reducing costs and environmental impact

In addition to convenience and safety, the environmental aspect also plays an important role. Billions of customer cards are produced worldwide every year. Most of these cards are made of plastic, which has a negative impact on the environment. Discarded loyalty cards are classic disposable products and experience has shown that they are rarely recycled or collected. Although CO2-neutral shipping of the loyalty card offsets the emissions caused, the environmental impact does not have to be. 
By switching to digital cards in payment apps, financial service providers can make an important contribution to reducing plastic waste and at the same time help companies to reduce their expenses: the production, distribution and administration of cards causes significant costs for companies, which are reduced by digital alternatives.

5. Value-added services that lead to business models

The more functions an app offers, the more often users access it. By combining payment services, loyalty programs and other features, the payment or banking app becomes a central companion in users' everyday lives. This increases the time spent in the app and reduces the likelihood of users switching to competing platforms. This provides a basis for obvious services such as digital invoice receipts or the financing of larger consumer investments. The financial linchpin of the app is emerging, which clearly supports the goal of saving customers money through customer loyalty programs.  

Since a 1:1 integration with all relevant customer loyalty programs is not a financially viable option for a bank and a fintech, the path leads via intelligent partnerships with platforms such as mobile-pocket. These enable the complete mapping of thousands of customer loyalty programs in all relevant markets with a simple integration. This means that an app offers retailers or program operators all relevant functionalities that meet the certified market standard.  This setup results in transparent added value for all parties involved. 

The integration of digital customer cards can also provide valuable insights into customer behavior. Financial service providers can thus provide their customers with tailored offers and product recommendations, which in turn increases cross-selling and up-selling potential. 

Conclusion

Those who focus on the integration of customer cards and bonus programs at an early stage will increase customer satisfaction and tap into the currently fastest-growing business potential in the banking sector. 
The payment or banking app becomes an all-in-one financial instrument that goes beyond mere account management and creates real added value in everyday life. In view of the predicted increase in the use of banking and wallet apps, it is only a matter of time before customer cards are completely replaced.
 
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