A London startup tests open banking rewards with U.K. banks, retailers

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London-based fintech Flux is leveraging open banking and PSD2 to work with U.K. banks and retailers to give their customers paperless receipts, digital loyalty stamps and digital cashback offers.

Flux says it is tackling the problem of the long-standing gap between transactional banking data and retailers’ item level data, wherein electronic point-of-sale transactions generate paper receipts and loyalty offer vouchers.

“Our mission is to digitize, automate and organize consumers’ receipts whilst creating more valuable interactions with a positive environmental footprint,” said Veronique Barbosa, co-founder and COO of Flux. “We’re payment method-agnostic, and work with physical payment cards as well as Apple Pay and Google Pay, but not cash.”

To use Flux, customers must have a mobile banking app from one of Flux’s banking partners, into which they receive digital loyalty stamps, receipts and cashback.

According to a July 2017 survey report by Deloitte, 22 percent of U.K. consumers — 10.3 million people — had unused loyalty points last year, amounting to over £4.5 billion worth of unused points. In addition, over 11 billion receipts are printed in the U.K. each year, at a cost to retailers of £32 million.

“In the 21st century, it’s ridiculous that people are still paying in shops with contactless cards or mobile wallets and being given paper receipts and offer vouchers,” said Barbosa. “The reason this is happening is that the transaction data from the bank isn’t communicating in real time with the item level data at the point of sale on the retailer side.”

Flux rewards a consumer for a purchase in a store, such as buying a caffè latte, within their mobile banking app with cashback or a digital offer coupon.

Flux "acts as the bridge between retailers and consumers,” Barbosa noted. “We pay cashback on average within 11 seconds of the purchase taking place, which contrasts with traditional loyalty schemes that can take a month to credit the consumer with cashback.”

Flux was founded in June 2016. In July 2018, Flux went live on Barclays Launchpad, which is Barclays’ initiative for testing new services with around 10,000 customers, so that the bank can decide whether to roll them out to all its U.K. 5 million digital banking customers.

The pilot initially involves Flux sending digital receipts in real time to Barclays Launchpad users. In addition, Flux is partnering with Barclaycard to issue digital receipts to any customer from a participating bank which is enrolled into the Flux service. Last year, Flux was one of the fintechs featuring in Barclays’ Accelerator Program.

“Flux is an interesting company with an attractive proposition to — at least some — retailers, banks and consumers,” said Zil Bareisis, a senior analyst with Celent. “For merchants, it can help run a frictionless loyalty program, which is good news for consumers, who also can get full digital receipts at their fingertips. For banks, visibility into SKU-level detail of what the customer is buying, takes their understanding of customers into a whole new level. However, getting that detail has never been easy – it requires retailer participation and integration into their POS systems.”

Like her two Flux co-founders, Barbosa previously worked at U.K. fintech Revolut, where she was one of the first employees and Revolut’s head of partnerships.

Barbosa stressed that Flux acts entirely with the informed consent of the consumers who sign up for its technology.

“In the post-Cambridge Analytica/Facebook scandal era, there has been a seismic shift by consumers about privacy,” she said. “Now you have to be extremely open and explicit not just in your terms and conditions but even before consumers get to the T&C page as to what data you’re asking for and why you’re asking for it. What differentiates Flux is that we are very much in front of the customer and don’t hide behind a white label.”

Flux has an AIS (Account Information Service) provider license under PSD2 from the U.K.’s Financial Conduct Authority (FCA).

“Our AIS license allows us to access transaction data from banking customers with their explicit consent, so we can create useful new features and insights from that data,” said Barbosa. “Under GDPR regulations, Flux acts as the data controller for our users’ data, and there are clear restrictions as to how banks can use this data. Also, the data that retailers see is anonymized.”

Flux launched its platform in April 2017 and now has three U.K. banks, Barclays, Monzo and Starling Bank, and three U.K. retailers, Costa Coffee, Eat and Pod, using its technology.

Eat and Pod are both restaurant and food chains, while Costa Coffee is a coffee shop chain. “We’re in a pilot with Pod and in a full partnership rollout with Eat,” said Barbosa. “Eat is using our three products, digital cashback offers, loyalty and receipts.”

Pod said that it is testing Flux digital loyalty cards and paperless receipts being deposited directly into customers’ banking apps across its stores. Pod is using Flux for a buy-five-get-one-free promotion on scrambled eggs; after five purchases, it detects automatically that the offer can be applied and gives a cashback reward on the sixth purchase.

While U.K. challenger bank Monzo is conducting a closed user trial with Flux, rival challenger bank Starling Bank has a fully rolled-out partnership with Flux. In July 2018, Flux launched a trial of its platform with Costa Coffee’s coffee shops in central London. In the first phase of Flux’s trial with Costa Coffee, consumers will receive digital cashback rewards through Flux’s integration with Starling and Monzo.

“When Starling customers open an account, they have access to our Marketplace which includes Flux, the first partner we launched with back in September 2017,” said Charlotte Lorimer, communications and marketing executive at London-based Starling Bank. “Customers can sign up to Flux directly from our banking app, and, if they use their Starling card at Eat or Costa, they may receive cashback on these transactions without having to show a loyalty card or download another app. Everything happens automatically."

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