Discover finds its way into mobile payments
When Apple announced Apple Pay last fall, Discover was the only card brand that did not have an agreement to be included in the new mobile payment system. That led to some questions from industry observers about Discover's intentions regarding mobile payments.
Fast forward 12 months and Discover finds itself compatible with Apple Pay and soon to support Android Pay and Samsung Pay. While Discover defers questions about its initial exclusion from Apple Pay to Apple, the network and card issuer is happy to talk about what it's learned about the mobile wallet space and why it approached things a little differently once it found its way into a major mobile wallet.
Discover tackled mobile payments in the same way it approaches its relationship with cardholders: through service and rewards. Through the end of the year, Discover is rewarding cardmembers in the U.S. with a 10 percent cash-back bonus (on up to $10,000 of in-store purchases) when they use their Discover card through Apple Pay. Discover it Miles, Miles and Escape cardmembers will earn an extra 10 miles per dollar on up to $10,000 of in-store purchases.
Discover also is enabling cardholders to activate their card for Apple Pay through the Discover mobile app.
Matt Johanson, vice president of Discover network operations at Discover Financial Services, sat down with Mobile Payments Today at last month's Money 20/20 conference in Las Vegas to discuss the company's view on mobile payments.
MPT: Why did Discover go this route — rewarding Discover cardholders for paying with Apple Pay?
MJ: Our top priority [with mobile payments] is participating as a tender type in all major third-party wallets. Immediately following that priority is continuing to reinforce our brand in those wallets and our brand is all about service and rewards.
Everybody has been waiting for what is going to push the value proposition beyond "gee whiz" on mobile payments, so this is a promo that introduces the behavior a little bit. On the other side, we were the first bank to include a provisioning into Apple Pay from our app. Our approach has been that we want to participate in these wallets, but when we get there, we want to differentiate our brand just the way we do in the physical world.
MPT: In general, what is Discover's view at the moment on mobile payments?
MJ: If I'm sitting in my chair from the payments part of our business, not from the banking side of our business, we want to make sure that consumers who transact on the Discover brand have a choice on where and how they spend using our products. And that gets back to being available in every major third-party wallet.
It's also about learning. What can we do to push learning up in the investment cycle? We can experiment with things and extend beyond our own app and there's work being done in the background in terms of testing and piloting some things. As the ecosystem plays out, there's probably not one winner. But we want to be there in whatever [the providers do] and in that we continue to provide the service and rewards unlike what any issuer does.
MPT: From a consumer perspective, is it a problem that there are so many options with mobile wallets?
MJ: Consumers are the ones that get to decide. It creates more choice, but I don't think it's a problem, per se. The consumer is going to decide what's most convenient for the consumer. Are they going to use five different wallets? Are they going to use one wallet? If so, how is that one wallet going to get ubiquitous acceptance when there are so many players?
I think there is going to be this natural tension for a while as different wallet providers rise up. I don't think more wallets are a problem. I only carry one physical wallet, and I don't think I'm going to use much more than one mobile wallet. It's going to come down to consumer value. I do use the Starbucks app every time I'm in Starbucks and I do use Apple Pay elsewhere. That's just an example.
MPT: Is there a particular reason why Discover wasn't with Apple Pay to start?
MJ: That's a good question to ask the Apple folks. We're super happy to be there now. I think there have been a lot of lessons learned [by issuers] in the first year with Apple. We're happy that as we enter the wallet, we learned some things. We were able to avoid some of the early struggles on provisioning [that others experienced].
MPT: Why did Discover decide to go the route it did with provisioning for Apple Pay through the Discover app?
MJ: It was really just about service to the customer. We already have one of the, I think, best banking apps in the Discover mobile app. We have a heavy user base, folks are already in there and they're comfortable with it. If that's one more service we can offer in there, it's a no-brainer for us.
Will Hernandez has 14 years of experience ranging from newspapers to wire services and trade publications. Before becoming Editor of MobilePaymentsToday.com, he spent two years as the content manager for PaymentsJournal.com, a leading payments industry news aggregator and information hub published by Mercator Advisory Group. Will spent four years covering the payments industry as an associate editor for multiple publications in SourceMedia's Payments Group based in Chicago.