Keeping shoppers loyal, no friction burns

Payment Loyalty thinks customer rewards should be much easier for everyone

Hello there,

Loyalty programmes really annoy me.

I get frustrated several times a week trying to scan my Tesco Clubcard QR code at the checkout, and I repeatedly turn down coffee shop loyalty cards because I know I’ll always forget the little stamp cards.

Yes, I know all about how friction hurts these kinds of promotions. Today’s startup has a surprisingly straightforward solution, and it might just work. Scroll down to read all about Payment Loyalty.

Meanwhile, the confirmation that Barclays has won a key startup support contract currently held by Tech Nation has stirred up a lot of discussion on and offline. I shared some brief thoughts on the matter with Business Cloud.

Also, I’d like to give a shout out to Mumbli, which we have previously featured here at PreSeed Now. They’re currently raising via Seedrs. Go take a look - they’re already close to their target.

– Martin

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Payment Loyalty wants to keep shoppers loyal with zero friction

Reward programmes are an important thing if you’re a big name on the high street. Just look at how invested Tesco is in its Clubcard, or how Caffe Nero pushes its loyalty scheme to customers. 

But while companies like Square have revitalised the otherwise dull world of payment terminals in recent years, allowing smaller retailers to offer their own rewards initiatives, for some shops that might just be too complicated. 

Looking to combine customer loyalty with something more straightforward for shoppers and shop staff alike, and more suited to the needs of smaller retailers, is Payment Loyalty.

Friction burns

Co-founder and CEO Tom Holt says that rewards programmes traditionally create friction in the sales process. London-based Payment Loyalty removes it by tying rewards to the payment card, meaning mid-tier and independent retailers can let their customers collect loyalty points every time they ‘tap and go’ with a card payment. There’s no need to scan an app or stamp a card, or even enter any personal details at sign-up.

The software Payment Loyalty has developed runs on modern payment terminals, and rather than spend a huge amount on marketing to retailers directly, the startup is selling it via the companies that already sell these devices. 

Holt explains that sales companies already bundle point-of-sale tech, payment processing, and other services together for retailers. So it made sense to take this route, as the relationships with retailers are already there.

To get set up, a retailer can visit the Payment Loyalty website and create a campaign with custom branding and the specific rules for how their reward scheme will work. This is then synced to the retailer’s payment terminals. Customers then simply opt in when they pay; every time they use their payment card after that, they collect points.

An illustration of how Payment Loyalty signup can look to an end customer.

This simplicity is Payment Loyalty’s USP. It’s easier for staff, customers, and for the resellers who offer payment terminals - Holt says they prefer not to receive support requests from shop managers.

Learning the trade

Holt previously worked at marketing tech company Ecrebo as head of product marketing. There he got to know the world of point-of-sale tech and the importance of low-friction in-store customer engagement.

“Friction kills reach… If you eliminate friction for a customer to get involved with an offer or whatever kind of loyalty mechanic you're asking them to engage with, the propensity for customers to get involved increases hugely. 

“Ecrebo use the piece of paper printed out of the normal receipt printing module. It just works incredibly well because there's no friction. A well-trained staff member gives you an offer right at the point where your wallet or purse is open, without any need to download, show a card, launch an app or anything like that.”

Tom Holt

This insight, combined with awareness that the arrival of smart payment terminals was opening up new opportunities for third-party companies to provide services at the point of sale, led to the founding of Payment Loyalty.

When loyalty is greater than data

One thing that might raise some eyebrows about Payment Loyalty is how by not requiring any personal data like an email address or phone number, it pushes against the trend in recent years for retailers to capture as much information as possible about their customers. But Holt sees this as a benefit rather than a flaw.  

“I spent quite a lot of time in digital receipt technology. At the start, especially in the fashion market, digital receipts worked really well. A lot of customers were happy to give their email. But as the years have gone by, with data breaches and people fed up with spam in their inbox, that just doesn't work anymore.”

Another aspect of this tech that might be seen by some as a problem, but that Holt sees as a positive, is the fact that accruing points in a Payment Loyalty-powered rewards schemes relies on customers using the same card. As soon as they get a new card, they won’t be recognised and they’ll have to start collecting points again.

Holt says that for the market Payment Loyalty is targeting, this isn’t an issue. 

“The whole point with Payment Loyalty, and it's very relevant with the target market we're addressing, is to offer relatively low-value rewards but to do so frequently; make sure a customer gets that joy of saving a pound, or two pounds. With traditional approaches, there's this never-ending collection of points that's very possible, and getting to a redemption event often never happens. 

“What we're trying to say to our users is to offer something relatively small–a pound, or two pounds, or whatever it might be–and make sure you cycle through for your great customers. regularly. Make sure that as soon as they are ready to get a reward, they do so. It makes a difference. That's what drives loyalty.”

An illustration of the campaign creation process

Holt is keen for retailers to use the product for short-term campaigns to experiment with how they can improve business at particular times of the year.

“Those sorts of approaches have been used online for years, but offline in store, they've rarely had the tech to be able to do that. I want to reinvent loyalty and make small and medium-sized businesses understand it's not forever - it's a tool that you can elegantly use to incentivise customers when you need it most.”

How does it perform?

Payment Loyalty spent 2022 validating their product and their zero-friction hypothesis. Holt says they partnered with a payment terminal manufacturer and some sales partners and a group of 50 users to test the product. 

“We've got a good number of clients that see high 80s, or 90% customer opt-in. For us, that's absolutely amazing to see because it proves if something pops up and says ‘do you want to add your card?’, reducing the friction to a ‘yes’ or ‘no’ really works in terms of customers thinking ‘yeah, why wouldn't I?’”

Holt says that overall, Payment Loyalty sees customer opt-in levels of 70-90%. 

“For small and medium sized businesses, that is absolutely unheard of. They really have to be pumping the pedal to get many more than 30% or 40% of customers opted into a paper version, and it would take them a hell of a lot of work to do so.”

Scaling, investment, and product roadmap plans

Key startup information for paying PreSeed Now members:

With these findings in the bag, Payment Loyalty wants to scale quickly in 2023. This involves launching partnerships with more hardware manufacturers (Holt says the startup has completed contracts with three of the largest global hardware vendors and will be deploying across them all in Q1 of this year), and adding new channel partners to sell the product to retailers.