Mercator Advisory Group’s “The Mobile Incentives: The Next Step in Device-Based Transactions” report shows that the market is ready for mobile incentives today. While the long-term vision for mobile incentives centers on NFC technology, since wide-scale adoption of this technology is still several years away, this means there is opportunity for non-NFC models to dominate the mobile incentives market in the short-term.

“There is a large disparity between the number of consumers who have expressed interest in utilizing mobile incentives and those who have actually done so,” said David Kaminsky, analyst for emerging technologies at Mercator Advisory Group, Maynard, MA.

“Ten percent of consumers have received mobile coupons from pre-selected merchants,” he said. “However, when questioned, 55 percent said they were interested in doing so.

“That means that 45 percent of consumers have an interest in receiving this type of mobile coupon, they just have not been properly motivated yet.  This disparity existed in all types of mobile couponing or mobile loyalty programs that consumers were surveyed about.”

Interest is high
The growing penetration in mobile is not only driving growth in mobile payment transactions but also in the number of consumers who are using their smartphones to redeem coupons, daily deals and rewards as well as the number of companies engaging in mobile incentives programs.

However, very few consumers currently receive mobile coupons and loyalty offers, with only 10 percent of consumers having received mobile coupons from preselected merchants. Only 2 percent store coupons in a mobile wallet, 4 percent automatically receive coupons from nearby stores, 4 percent have replaced loyalty cards with an app and 4 percent receive reminders of available coupons.

The interest in these services is much higher. Among consumers who had not previously engaged in any mobile incentives programs, 45 percent are interested in storing coupons in a mobile wallet, 36 percent want to automatically receive coupons from nearby stores, 49 percent want to replace loyalty cards with an app and 40 percent want to receive reminders of available coupons.

The mobile incentives market is still forming and developers are taking different approaches to handling these efforts.

There are a variety of different mobile incentive programs available, including coupon aggregation programs such as Yowza!, daily deals services such as Groupon, merchant-based loyalty programs such as the one offered by Starbucks, reward program aggregation such as is offered by Google Wallet and loyalty service provider apps such as foursquare or shopkick. There are also payment service providers with their own incentive programs, such as is offered by PayPal.

The technical details of these programs are generally similar, with most offered for free to consumers and have availability on Apple and Android products. There are exceptions, such as Google Wallet, which is only available on select Android models.

Merchant opportunity
The market availability of the services varies.

Ultimately, integration of incentives with the mobile wallet is the end-goal. However, this is not likely to happen until NFC technology is more widely available.

Currently, not enough merchants are taking advantage of the interest in mobile incentives. This is likely to start to change with merchants either by developing their own apps, procuring white-label apps or partnering with incentives service providers.

“Mobile incentives programs make sense for merchants because mobile incentives allow merchants to establish contact their customers via a device that they keep with them at all times,” Mr. Kaminsky said. “In other words, mobile incentives allow merchants to effectively be in constant contact with their customers.

“Not enough merchants are taking advantage of this opportunity, because not all merchants are taking advantage of this opportunity,” he said.

“This isn’t to say that every merchant needs the same mobile incentives program that is being run by Target or Starbucks, but the wide variety of options currently available to merchants means that the vast majority of them should be able to find some way to use mobile incentives to their advantage.”