A closed loop payment is a transaction in which a client uploads money into a spending account that is linked to a payment device. A good example would be a gift card. A closed loop payment can only occur between a spending account and a single, specific company. Closed loop mobile payments are the mobile equivalent of this system. These systems use apps to manage gift cards and accounts through mobile devices. Clients can use their smartphones or tablets to check the balance within their closed loop payment system, top it up, or make purchases.
Benefits of closed loop mobile payments
Companies can benefit greatly from using these systems, with Tim Hortons and Starbucks having processed millions of mobile transactions using closed loop payments. To start, companies can collect and analyze highly accurate data relating to their customers purchasing habits, and then use their findings to tailor very effective marketing campaigns.
This data can also be used to increase customer loyalty, and to drive upsells and cross sales. Once a company has a firm understanding of their target market and purchasing habits, they can tailor customized promotions and offers and deliver them directly to their customers’ mobile devices.
Closed loop mobile payment systems have another tremendous advantage. Due to their exclusive nature, companies are able to monopolize a client’s mobile device when it comes to products and services within their niche. This is a competitive advantage that singlehandedly makes a closed loop system worth considering.
Should you implement a closed loop mobile payment system?
Customers have shown an interest in closed loop mobile system thanks to the bar code scanning capabilities of mobile devices. They also appeal to clients due to improved security. Closed loop payment systems do not tie into bank accounts or carrier networks, which means that there is an extra secure step between the bank account and a merchant.
Vendors also benefit from smaller purchase fees when compared to direct credit card transactions. On top of that, smartphones are now being used by billions of people, so the potential market is huge. If a company can convince a customer to take the first step, and simply download their application, they can immediately start presenting enticing offers to customers in order to get them to sign up for the program. This is especially relevant today, given that customers are very much interested in turning their smartphones into payment devices.
If you have the resources, you can start working with a trusted app developer and merchant service provider and find a new way that allows you to reach customers better, encourage them to buy, and gather data. Closed loop mobile payment systems are a win-win for both the vendor and the customer.
For more information about a closed loop mobile payment system or to sign up for a merchant account, please call (888) 924-2743 or go to Charge.com.