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Leaders In Payments
Leaders In Payments
Jonathan Silver, CEO & Len Covello, CTO at Engage People | Episode 349
Curious about how loyalty points might soon replace cash and credit at your favorite stores? Join us as we sit down with Jonathan Silver, CEO of Engage People, and Len Covello, CTO of the same company, to unravel the groundbreaking "Pay With Points" technology. Discover how this innovative system transforms loyalty program points into a versatile payment method, making checkout smoother for members and more profitable for retailers. Jonathan and Len shed light on the significant advantages this offers to loyalty programs, members, and merchants alike, and discuss the compelling business case behind this game-changing payment option. They also share revealing insights from a recent consumer survey, showcasing the high demand for loyalty currency amidst the economic downturn and why points are seen as more stable compared to buy now, pay later plans and cryptocurrencies.
But we're not stopping there. We also explore the future horizons of loyalty points in various retail landscapes—from gas stations to grocery stores and small businesses. Jonathan and Len reveal how major brands are successfully rolling out pay-with-points systems and the vision of loyalty points becoming an integral part of everyday transactions. Tune in for a thought-provoking discussion on the fascinating future of loyalty points in payments!
Welcome to the Leaders in Payments podcast, where we talk to C-level leaders from across the payments landscape. We'll be discussing the products and services that impact the payment space today, as well as trends and predictions for the future of payments. We will also hear stories from our guests about their journeys to the top.
Greg Myers:Hello everyone and welcome to the Leaders in Payments podcast. I'm your host, greg Myers, and today's special guests are Jonathan Silver, the CEO of Engage People, and Len Covello, the Chief Technology Officer of Engage People. So, jonathan, len, welcome to the show. Hey, greg, thanks for having us. I'm happy to be here. Great to be here, greg. Jonathan, I'm going to lead off with you, but, len, feel free to jump in. Jonathan, you were on the show a couple of years ago, so maybe remind our audience about Engage People's technology and sort of how your loyalty network works.
Jonathan Silver:Sure.
Jonathan Silver:As we discussed a couple of years ago, and all we've really done over the last couple of years is continue to expand and grow our network. And so we have a vision of enabling members in loyalty programs to use their points as a form of payment at checkout. And the goal is to democratize the usage of your points, to free them up and to create a better engagement. And so what we've built is a set of rails, basically, where people can go to a retailer, tap their card and on the POS it'll say, hey, do you want to use your points for that transaction? And so, look, it's difficult to do, but we've had great response, great uptake. It's been really exciting.
Greg Myers:Okay, Lynn, anything you'd like to add to that?
Len Covello:I think John hit the nail on the head. It's one of those things and, greg, you'll notice in payments is what appears to be the simplest solution or kind of the easiest thing. There's definitely a lot going on in the background, so, while it's taken us some time to get there a lot of hard work, a lot of great partners and that ease of use or that frictionless transaction that you're seeing with our implementations out there we learned a lot about payments over the years, I'll say that, and I feel there's still a lot more to learn.
Greg Myers:Okay, great, so Jonathan, back over to you. So what is the business case for Pay With Points as a payment option?
Jonathan Silver:So there are three constituents in the Pay With Points network. There is the loyalty program, there's the member of the program and then the partner or the retailer that's accepting the points as a form of payment.
Jonathan Silver:And so there, is a different value proposition for each three of those constituents. For the member it is very much around driving a better member experience and getting better value for their points. So that drives a higher engagement score, higher utilization. In our credit card program we see an increase in the spend on the card from the members who use Pay With Points and an increase in retention, so there's a really good member benefit From the financial institution. There is the member benefit, so higher engagement, higher spend as well, as we can actually derive the incremental value that they get from Pay With Points just in driving further utilization of cards.
Jonathan Silver:in addition, to reduction of liability and if there aren't any cost per point savings. So there is a very, very strong financial ROI on enabling paper points. And then for the retailer they now get access to new customers. We see an increase in spend from members who can use their points at a retailer and an increase in basket size, and it's at a lower transaction cost. So there's a huge benefit to the retail partner in this network as well.
Greg Myers:All right so, len, let's go over to you. So you released a survey recently that found 84% of consumers would in fact use loyalty currency as a payment option in the future if it was offered by their credit card provider. What do you feel is driving that demand? I mean, 84% is a pretty high number.
Len Covello:No, it is. I think the demand comes from a number of things. We've gone through some interesting I'll call it financial times the last number of years, starting with the pandemic and just the economy in general. So this is one of those things with inflation that's helping consumers kind of subsidize a payment. You can look at it as a discount. There's always been this connotation of loyalty that those points are kind of free money. We have the proverbial asterisks around that or quotes around that. So consumers are seeing that. And now when you're looking to transact for something, whether it's an everyday spend or an aspirational item, is that that cost is coming down for the consumer. So really what we see consumers using this as is not just a surprise and delight but an opportunity to drive down the cost on their everyday spend. And looking at a number like that 84% it's understandable on why people want to see those savings and why they want to use an additional currency out there that they have access to.
Greg Myers:All right, Len, let's stick with you. What makes Pay With points a differentiator compared to other alternatives like a buy now, pay later, which you see almost everywhere these days?
Len Covello:I think the easiest thing to say is this is a stable currency. It's a currency that's out there. You have access to it. It's funded, so that currency is funded ultimately by the loyalty program, so there's no risk with it. The BNPL opportunity for consumers is a way to kind of take your payments and spread them out or kind of defer that payment out, but the consumer is still on the hook for the full value of the transaction. There's been other alternative payments out there.
Len Covello:Crypto gained some steam a few years ago as possibly an alternative payment, but that had volatility with it. This is really almost like you're opening up another piece of your wallet and finding that money that you'd put away. When you take out a suit jacket that you hadn't worn in a few months and you've got that money there. That currency again is fully stable. It's ready to be used and, with Access Plus in the market today, it's used in real time. So this isn't a conscious effort that I'm going to go to the loyalty program and redeem for something and wait for that to arrive, or it's not a statement credit. This is a real-time ability to use that currency.
Greg Myers:Yeah, and it seems like it's I don't know. There's something that some excitement around it. Right, it's like, oh, wow, I've generated all these points. Wow, I've generated all these points, I need to spend them. It just feels like there's an excitement factor to it.
Len Covello:You're 100% right. It's bringing that back to loyalty. I'll steal John's thunder but we always talk about how loyalty kind of created this relationship and that was the point of it earlier on, when someone redeemed for an item and they got that reward. And then we saw this shift just in the industry in general, people moving to gift cards as a redemption option and that broke the relationship up from the program sponsor, the loyalty program and ultimately that reward of the redemption that the consumer had.
Len Covello:So you'd earn a number of points you'd redeem for typically a gift card, because you didn't have that choice or that selection and you didn't know what you wanted. Put that in a drawer or you put that somewhere else and then ultimately you shopped a few months later and that relationship was gone. You didn't know what you wanted. Put that in a drawer or you put that somewhere else and then ultimately you shopped a few months later and that relationship was gone. You didn't kind of give the attribution to where it needed to come from. And that's come back with pay, with points. Now I know that when I'm tapping, when I'm checking out and I can use my points, I know exactly where that's coming from. It's building that bond back with the consumer and the loyalty program.
Greg Myers:Okay, jonathan, over to you. So we're coming off of Prime Day and Amazon is one of your big partners. So how can using points help shoppers maximize sort of that user experience with Amazon?
Jonathan Silver:So if you can explain what Len was talking about, if you think about a member experience historically because if I wanted to go redeem my points on Amazon, I would have to go back to the loyalty sponsor site, redeem a gift card, get an e-gift card via email, then go to Amazon, and so it's a disjointed experience. What Access Plus does is create a single, one-stop inflow experience for a member. So when you are on Amazon's website and there's a bunch of technical stuff in the background where we've linked your cards ahead of time, and so you show up to purchase an item and at checkout it just says hey, do you want to use your points for this? Right in line, single transaction, single process. And so when you think about a member uptake, we are seeing approximately one in four members of a loyalty program redeem with pay, with points, on an average of 3.9 times a year. So it's a huge impact and a huge amount of engagement and member utilization. And so then when Amazon runs its Prime Days, they have this huge spike in sales and we see I can't really share the data, but it's north of six, seven times increase for those days of point utilization and what we do see
Jonathan Silver:and we're still doing a lot of research on this and getting feedback, but what we get anecdotally from members is they're waiting and prime day happens, and now they're getting an incremental benefit. They're going hey, I'm getting the savings on Prime Day plus, I'm getting it even either for free or further reduced, and so people are waiting for it, and so what we'd like is the convergence of the largest e-commerce retailer in the world. That's driving consumer behavior, and our members are jumping on board and actually enhancing that experience. Look, it's been unbelievable from member utilization.
Jonathan Silver:Hopefully it's great for Amazon, but we also know for our financial institution partners. They get as excited as everyone else about seeing the engagement and the utilization during those days.
Greg Myers:Sure. So I guess the days of having loyalty points and then you have to go to this third-party website and you get to choose from travel and all these different options, and I guess those days are kind of gone. Now, right, it's more instant gratification and it's the ability to use points on what you're buying today, as opposed to sort of leaving the retailer's site to go to this other marketplace or whatever. I assume those days are pretty much gone.
Jonathan Silver:They're going. They're not gone yet. But if you think about a member behavior, if I decide I need to go and buy a TV, I'm going to go to my favorite retailer to do that. So unless we're doing a lot of marketing around, hey, you've got to come here and see this offer. It's not part of people's consciousness. Travel's a little bit different, because travel's a conscious decision. They're large ticket items. I'm going to do it once a year, once every couple of years, but for the everyday spend and the frequent transactions, it doesn't cross my mind to go. I need to go and buy something. Let me go back and see what's available on the website. Where you do go, hey, I'm going to buy something, I'm going to get it on Amazon and, by the way, I'm going to have it this afternoon or tomorrow morning and now we can tap into that and further enhance and drive both loyalty and the member experience.
Greg Myers:So, jonathan, you also have a partnership with the company Velocity Logic that's allowing BP gas stations to accept loyalty at the pump, which I think is a fascinating use case, so can you tell us more about that?
Jonathan Silver:Sure. So right now there's a huge focus on a lot of feedback from members around being able to use their points for everyday spend and, with inflation and everything we've been through over the couple of years, gas and grocery are the number one and number two item that everybody says to us. That's where I want to use my points, and so we launched with BP and we are rolling out to numerous other gas stations over the next three to six months.
Jonathan Silver:But the idea was allowing you to use your points to get a reduction in the price per gallon, and so a member would go out, they would insert their credit card to pay and it would say to you for X number of points do you want to save 50 cents a gallon? Member said yes, and we actually rolled back the price at the pump and the response has been phenomenal. We are getting a massive uptake on the offer. It's running at about five or six times higher than we expected to go from an uptake point of view. We are seeing multiple utilizations. We see members coming back every couple of weeks to reuse the solution and reduce the price of their gas, and the number one feedback we get from members and from clients is well, where are the rest of them, when are the rest of the gas stations? And so we are rolling out into four or five other major chains over the next couple of months. So, Steve, you'll see those press releases and those announcements coming out shortly.
Greg Myers:All right. Well, this question is for both of you, but, Len, let's start with you. What other opportunities are you seeing in the retail space?
Len Covello:I think it's the integration of the pay-with points into the broader strategy for the retailers themselves.
Len Covello:One of the things that's really important to us when we're talking about the implementation of this is trying to understand the broader strategy for that specific retailer and then the loyalty program as well.
Len Covello:You don't want this to be disjointed. Once a consumer has an account with a specific retailer, our APIs can service up your points balance. They can service up that redemption piece. So now, as a consumer, if I'm in a mobile app or I'm on the website, think about, as you're scrolling through and you're searching for items, being able to show the value or the discount you have directly while looking at that product. So we talked about the TV during this call. If you're looking for a TV, we can show that discounted in real time for the consumer. So I still think there's a tremendous amount of opportunity on the marketing side and, ultimately, the consumer experience. Here. I think the payments piece is obviously the fundamental rails to make this magic happen, but exposing this to the retailers. We're excited to see what they'll do with it and what their UI and UX teams will do with this overall experience.
Greg Myers:Okay, jonathan, in that same kind of vein. We talked about Amazon, obviously so e-commerce, and then you talked about gas stations and everyday spend. What other kind of retail environments are you seeing that are really starting to adopt this?
Jonathan Silver:Yeah, so as we're rolling out over the next three-year plan of implementation, it's focused on specific areas further gas, everyday spend, groceries. We're also now in conversation to integrate into POS and.
Jonathan Silver:SMBs and small businesses so that you walk into the local coffee shop and you're all used to the screen that says you know, tap your card, do you want to go to it? And the next screen will be do you want to use your points for this? And so what it's allowing small businesses is the opportunity to get access to this huge base of members. You know, today we have 40 million Businesses the opportunity to get access to this huge base of members. Today we have 40 million active members. We'll be over 140, 150 million in about a year. So it's a huge base of consumers.
Jonathan Silver:And so those are the two areas of focus for us Big chains, big footprints, and then a wide, long tail of small merchants Across the board. For all of the merchants, what we're also now starting to get to is linking offers back and overlaying an offer with your redemption, so the ability to go to and say, hey, this person spends $100 a month with us. Hey, if you spend $200, he has bonus points or a cashback and still use your points at checkout. And so it's becoming very much a full circle way of the 360 view of how do I drive more engagement, how do I get members utilizing my location versus my competitor and driving better value for everybody along the way.
Jonathan Silver:Beneficial of this beyond the financial institution and the retailer is the member who's getting a lot more value for their points and for their loft, and the retailer is the member who's getting a lot more value for their points and for their loft.
Greg Myers:All right, so Len over to you. So where have you found the most success in terms of implementing your strategy and fostering adoption?
Len Covello:I'll go back to what I mentioned around the brands or the retailers that are really focused on the best way to use that experience. We talked about BP. It's a really elegant experience. I tap, I've got that offer coming to me in real time and I can use it accordingly.
Len Covello:People have tried pay with points in different iterations in the past and there's been friction to this. It's been a post-transaction decision where you'll get a message, sms, text on your phone. Do you want to use points, yes, no, or consciously going in and looking at your transactions and applying your points later on. So it's really the consumer experience where we see the best adoption and the best implementations of this, and it's great. The partners we've been able to work with, some of the biggest brands in the world, are coming to the table, and they're coming to the table not with a let's implement this and see how this goes. It's a broader strategy of how they want this to be successful. So I would say again, really focusing not just on using those points, but how you're going to use those points as part of the transaction is where we see just fantastic adoption and great implementation.
Greg Myers:Okay, so this question is for both of you, but, lynn, let's just stick with you. Where do you see this heading in, say, the next two to three years? Where's this loyalty space headed?
Len Covello:This will be ubiquitous. I mean, john talked about the democratization of points. It'll be expected by consumers. It'll almost be odd if you're not able to use that currency in all your day-to-day transactions. Again, going back to the extremely stable funded currency that's available to consumers when I go to buy coffee, when I'm looking to book travel and all the transactions in between, when I'm heading off to the store, can I use this currency to send payments to other people? There's going to just be a lot of ways where people look at this currency not as that free money that was sitting on the side that I tapped into every few months or if not longer, but a currency that I expect to have available to me at all times. So that's where this is going, and nothing drives adoption bigger than consumer expectation and consumer demand, and we're seeing that. And again, I think we'll be on a chat in the not-too-distant future talking about how this is available everywhere.
Greg Myers:Okay, Jonathan, your thoughts on that. Where is this headed in the next few years?
Jonathan Silver:Yeah, so exactly what Leonard said this will become ubiquitous, and then the next piece will be how do you use this to engage a member?
Speaker 1:And so the ability to.
Jonathan Silver:You know, everyone's connected on their phone, but the ability to put an offer inside of their wallet for them to go and say, oh, here's something special for me, to use my points and having those geotagged offers customized down to a specific segment of the population, offers customized down to a specific segment of the population we'll start to see the loyalty programs becoming closer to their end goal, which was how do I create a unique experience for a member that's relevant to them? And the tools, the ubiquity of using your points as a form of payment and overlaying that with an offer will actually allow us to get to that original vision, which was I'm going to make this part of your everyday life and so you're going to become so intertwined with my loyalty program you're never going anywhere else.
Greg Myers:So Len question for you how will loyalty points continue to impact payments?
Len Covello:I think adoption of ideas and strategies by other fintechs out there. The fintech space has been incredible over the last number of years. You've seen these companies take legacy systems and just have a different spin on that, and the innovation we see from that is incredible. So we almost feel at Engage, this kind of I won't call it an obligation, but kind of this position to attend these payment events and speak at these events to let people know what's coming. And then we're excited. John and I have the fortunate opportunity to talk to companies saying what if we did this, or could we use your rails to do that? So I think we're going to see a lot of innovation Again.
Len Covello:It's almost imagine a new currency being added to the world and with that comes everything that we see in payments. How are we moving that currency across borders? What are the other cool things we can do with that currency? Recurring payments, paying bills We've seen companies like Built transform an industry just with what they've done. And I'd argue some of the things we're going to see we're not even sure what they are yet. It's really some bright-minded startups out there that'll see what we're able to offer with our network and our rails and just build upon that.
Greg Myers:Okay Well, jonathan Lynn, we've covered a lot of ground, obviously, about the company and what you guys are doing, some of your partners and the innovative stuff that they're working on and that you guys are helping them with. So is there anything else you'd like to cover before we wrap up the show?
Jonathan Silver:This is exciting. It's changing an industry and it's allowing our clients and our partners to actually deliver value, and so it's an exciting time to be in the middle of all of this and, as Leonard said, it's going to evolve rapidly but it is going to become ubiquitous and glad to be part of this growing trend.
Greg Myers:Len any final thoughts.
Len Covello:Just echoing that it's a journey. It's one of those things that, when you look back, it took longer than you expected from the initial idea. I remember John talking about this earlier on on how to use that payments at checkout but we're there. We're in this incredible, exciting time of just huge adoption. The advantage we sit in the world today in fintechs is that things come to market very quickly and we're able to deploy things quickly. So it's just a really exciting time for us and, I think, for the industry as a whole. So it's a transformation in loyalty and we're seeing some great stuff from a lot of companies. So, again, just an exciting time.
Greg Myers:Okay, great. Well, thank you both so much for being here. I know your time is very valuable, so thank you again for being on the show today.
Jonathan Silver:Great Thanks for having us.
Greg Myers:Pleasure Great, and to all you listeners out there, I thank you for your time as well. Until the next story.
Speaker 1:Thank you for joining us this week on the Leaders in Payments podcast. Make sure you visit our website at leadersinpaymentscom, where you can subscribe to the show and where you'll find our show notes. If you enjoyed listening, please share on your social channels as well.