Cellum Insights

Your amazing credit card rewards are safe in our mobile wallet

While the consumer credit industry is increasingly becoming a global business, it continues to retain local character. An eye-opening example of this is provided by the cover story in the current issue of Bloomberg’s Businessweek magazine, which highlights the frenzied consumer response to the introduction of a new credit card by JPMorgan Chase, the largest issuer of credit cards in the U.S.

everyone-loves-plasticA large percentage of credit cards issued in the U.S. today offer “points” equal to or a multiple of the dollar amounts spent, which can be cashed in for airline tickets and other rewards. But Chase’s Sapphire Reserve takes the practice to a whole new level. New holders get a signup bonus of 100,000 points, triple points for travel and dining purchases, and admission to airport lounges around the world, as well as other privileges. And while all this comes with an annual fee of $450, one leading blogger covering the world of credit card reward schemes called it a “no-brainer.”

For most people around the world all the above would seem shocking, just as most Americans would probably be shocked to discover that even basic points-for-spending reward schemes are still rare outside the US. (Or that credit cards are overshadowed by debit cards in retail transactions.) And while we are not going to soon see the “mass affluent” of Spain or India spending the equivalent of hundreds of dollars on a credit card before making their first purchase, card rewards schemes are likely to become more common in markets worldwide.

Which raises a question that consumers and others have long asked about mobile payments, namely whether cards with reward programs get all the same points and other benefits if they are used in a mobile wallet, as opposed to presented directly to a merchant.

The answer is almost always yes. While the mobile wallets that firms like Cellum, Apple and other leading tech firms create will for security reasons fully encrypt or “tokenize” cardholder data, the issuing bank still knows exactly which and what kind of merchant was on the other side of a transaction. This means the cardholder can be credited with whatever rewards they are due for all their purchases. Moreover, mobile wallets open up a range of other reward-related benefits for consumers, by allowing them to store and easily use an unlimited number of loyalty cards and related instruments – and all the while enjoying a much higher level of security.

If there is a drawback to using the mobile version of a card, it’s not being able to smartly throw a high-status card down on the counter or table (the Sapphire Reserve has a heavy metal core, to enhance what people in the card business call its “plunk factor”). On the other hand, for most of the world choosing speed, convenience and security are considered pretty smart, too.