Kohl's Apple Pay deal illustrates why mobile wallet is a lot harder than it looks

The cool part here is Kohl's integration, which makes it just about effortless for the shopper. Or does it?

Apple Pay sticker

Apple Pay sticker on the door at the Crush and Cask in Saratoga Springs, N.Y.

Credit: Ryan Faas

Kohl's and Apple's retail loyalty deal, announced on Wednesday (May 4), is a key step forward in mobile payment. Even though loyalty and CRM are essential kinds of apps to integrate into mobile payments, that's not why it's such an important step. The cool part here is Kohl's integration, which makes it just about effortless for the shopper. Or does it?

Many of the proposed loyalty mobile payments efforts put a lot of onus — a.k.a. hassle, work, uncompensated labor, etc. — on the shopper. What Kohl's has done — for anyone who already has a Kohl's loyalty card, part of the chain's Yes2You Rewards program — is to have the associated Kohl's credit card treated like any other payment card from Apple Pay's perspective. That makes it more of a loyalty/store card, but the result is the same: As easily as someone can use a Visa card in Apple Pay, the Kohl's card will work and will automatically register frequent purchase points for that shopper.

"You can add the Yes2You loyalty card into Apple Pay the same way you would add any other form of tender," said Kohl's spokesperson Julia Fennelly. "You can then earn Yes2You loyalty points when you use Apple Pay to pay for Purchases at Kohl's. You do not need to use Kohl's app: Everything happens within Apple Pay."

Better yet, no app at all has to be launched, which I have always considered the best part of Apple Pay. The smartphone can be on airplane mode with no apps open and merely holding it by the reader opens a screen — displaying the image of your chosen card — that tells you to briefly depress your finger. 'Tis done.

Alas, that's not quite how it actually works. First off, it appears that it would not be the loyalty card that would be entered into Apple Pay, but a separate card called Kohl's Charge, which can be linked to Kohl's loyalty program. This integration would be this effortless if shoppers used their Kohl's card as their default card. But given that the Kohl's card can only be used at Kohl's (or Kohls.com), not much point to making it the default card. That means that a shopper would need to open Apple's app and select the Kohl's card each time. The effort level is inching up.

Various mobile payment schemes have spoken of using a store's Wi-Fi — or a combination of store Wi-Fi and gelocation coordinates — to detect when a shopper is in a particular store. That would allow a one-time hassle, where the customer would select multiple default cards. One general default and other default cards under different circumstances such as "use my Costco card when you conclude I am standing inside a Costco store, but use my Kohl's card when I am inside a Kohl's."

Aite Group senior analyst Thad Peterson, who specializes in payments issues, said there's a key difference between needing loyalty capabilities in general and being able to handle a specific loyalty program for one or two retailers important to that shopper.

"Ever since people started talking about mobile wallets, there has been an opinion that adding a loyalty/promotion capability would be necessary for wallets to get traction. That’s not exactly true," Peterson said. "What’s essential is that the wallet be able to handle an individual merchant’s promotion and loyalty program so that the wallet can provide a complete merchant focused experience at the point of sale. It was purportedly one of the unique aspects of MCX/Current C. This capability is an essential component of the merchant value proposition for accepting mobile wallets. Apple appears to have recognized this with the integration of the Kohl’s loyalty program. It’s a major enhancement to the offering. I would expect that other merchants will start to think about how they can use the mobile wallet to improve the customer experience."

Without that ability to automatically detect when a shopper is inside a store and to then have the app know to bring up a pre-selected card for that store, this seems like a lot of extra effort for not much benefit. It requires two extra pieces of effort that are not normally required: opening the Apple Pay app (which confusingly isn't even labeled "Apple Pay" on an iPhone, but is instead labeled "Wallet"); and selecting the non-default Kohl's card. They might as well save the keystrokes and just pull out the plastic, sad as that may seem.

It's a good effort, Kohl's, but more than anything else, this illustrates why adding loyalty to mobile wallets is not nearly as easy as it sounds.

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