Jeff Mullen, CEO of payment startup Dynamics, told Loyalty 360 he hopes that authorization-based rewards – which his company launched in the fourth quarter of 2012 – will significantly impact the credit card industry.
“Everyone else does settlement/statement-based rewards,” Mullen said. “We’re focused on decisions made at the point and moment of transaction.”
Mullen said the authorization-based rewards launched with Dynamics ePlate – a battery-operated credit card that offers customized payment experience rewards with the push of a button. Credit card users can customize their payment experience at the point-of-sale.
With ePlate, earned rewards can be changed on a daily basis, allowing the combination of every rewards system onto one credit card from a single issuer, Mullen said.
“It’s pretty hard to be engaging in loyalty without having a real customer relationship,” Mullen said. “It’s the only authorization-based process on the plant. Before the card is back in the wallet, we can take the customer desire and customer fulfillment to a new level. When you do that, consumers’ understanding of how they’re being serviced is exponentially desired.”
The Dynamics technology enables the magnetic stripe card to have much of the same functionality of a chip-based card or mobile payment device.
“Some people are starting to realize the importance of instant gratification and instant decisioning, but we can’t do that unless consumers tell us what they want in the moment of transaction,” Mullen said. “We signed our first deal over three years ago for authorization-based rewards, and it took us three years to build this and debut it nationally. This give consumers control over their everyday purchases and lets the consumer talk to the issuer.”
The ePlate™ credit card device is connected to an ecosystem of experience™ providers that each deliver a unique experience™ reward to the consumer. When making a purchase, a consumer simply presses a button on his/her ePlate™ credit card device to receive the experience™ reward associated with the pressed button. At any time, online a consumer may change the experience™ rewards associated with the different buttons on his/her ePlate™ credit card device. The credit card rewards are called experience™ rewards because experience™ rewards are the first rewards to be delivered instantly, within seconds of a purchase, to the consumer. What’s more, experience™ providers are presented with consumer-approved payments data so the rewards can be personalized to a consumer’s spending habits. The ePlate™ payment device is as durable as a traditional payment card and will last more than three years on a single battery charge. The technology does not require any change to the 60 million 1970s-era magnetic stripe readers or reeducation of its merchant base, Mullen said.
Some of the participating merchants also provide additional bonuses that enhance their engagement with customers.
“Every six months we’re upgrading and choosing new functionality and increasing our competitive advantage,” Mullen said. “When consumers select the reward they want, banks immediately respond via the authorization-based rewards system.”
How do authorization-based rewards impact loyalty?
“Completely a game-changer,” Mullen said. “With this, the reward actually becomes part of the transaction. We’re changing and enhancing consumers’ lives because we’re putting a reward into the transaction.”
Mullen said there are 37 rewards partners in the Dynamics system.
“Everything is going great,” he said. “We know we’re having success because we’ve noticed people are really changing the rewards based on the size of their purchase.”
Why isn’t anyone else doing this?
Mullen said authorization based rewards require material connections, infrastructure (e.g., security), processing power, and intelligent, adaptive programming. Companies have never wanted to go faster than the statement because of how many things can happen post-authorization, he added.
An authorization-based reward system cannot be optimized without being able to insert messages into the authorization stream. Dynamics’ cards can insert messages into the authorization stream by changing the magnetic stripe information before a transaction is made at a terminal. What’s more, an optimal authorization-based reward system has an interface component so the consumer can see and interact with their rewards. To achieve this, Dynamics built the only non-native (i.e., not stored on the phone as a native application) payment interface for payment controls and reward delivery.
“This architecture gives Dynamics significant advantages over native-based applications,” Mullen said.