Merchant Apps Move Payment Choice into the Background

Merchant apps can turn a one-time decision to save a card into a recurring advantage for its issuer. New research from Auriemma Group’s latest issue of Mobile Pay Tracker suggests that by moving payment choice into the background, these apps are creating another important battleground for top-of-wallet status.

Among cardholders who use merchant apps, only 5% say they regularly choose different payment methods within the app. This creates a potentially durable advantage for the issuer whose card becomes the default payment method within an app.

“The merchant app can move payment choice into the background,” says Jonathan O’Connor, Senior Manager of Research at Auriemma Group. “Once cardholders save a payment method and become accustomed to a faster checkout experience, they may have little reason to reconsider which card they use for each purchase.”

This advantage applies only after a cardholder decides their relationship with a merchant is established enough to justify saving a card. Nearly three-quarters (72%) of cardholders who have downloaded merchant apps require an established relationship with a merchant before saving their payment information. One-third (34%) would need to make several purchases per month before doing so, while another 19% would need to shop with the merchant about once per month.

This makes merchant apps especially relevant in frequent-spend categories. Among cardholders who have downloaded a merchant app, 73% have at least one from an online retailer, 62% from a big-box retailer, 52% from a grocery store, and 50% from a quick-service restaurant. These everyday purchase environments give saved cards repeated opportunities to capture spend without requiring the cardholder to make an active payment decision each time.

Looking ahead, tools that surface the value of competing cards could bring payment choice back to the foreground. When asked to imagine merchant apps evolving to recommend the best payment method based on rewards or savings, half of cardholders expressed interest (51%). Although the research tested this hypothetical capability within merchant apps, the potential effect extends further: tools that compare card value at checkout could prompt shoppers to reconsider their default payment method and rotate toward a card offering greater value.

“Merchant apps can move payment choice into the background, but that does not mean issuers can take default-card status for granted,” says O’Connor. “As tools help cardholders identify which card will maximize their rewards, purchases that routinely flowed to one card could begin rotating among several.”