Consumers’ growing dexterity with banks’ mobile apps has been a welcome shot in the arm for card-linked, merchant-funded marketing programs.
Banks’ card-linked offer redemption rates are up an average of 20% to 50% over the last few years, say technology providers, and participation from merchants is expanding.
Mobile apps make it easier for consumers to find and redeem card-linked offers when they’re out and about—instead of fumbling through a list of offers buried on banks’ online web sites—which has been the primary mode for accessing card-linked offers for years.
But banks also are getting more aggressive about pushing card-linked offers to the forefront of mobile apps, and one of the reasons may be fear, industry experts suggest.
“Banks are worried about being disintermediated by some of the new mobile payments players,” said John Brown, U.S. president of Atlanta-based Cardlytics, Inc. a provider of card-linked offers to large banks in the U.S. and U.K.
Though rewards tied to specific purchases aren’t a centerpiece of Apple Pay, Android Pay and Samsung Pay, their potential power to adroitly bridge payments, merchants and rewards via the mobile channel is causing concern for financial institutions navigating the rewards landscape. MCX has promised that CurrentC, its mobile wallet still in the pilot stage, will hinge on rewards. And JPMorgan Chase said rewards will be part of Chase Pay, its mobile payments service announced last fall.
“Banks have consumers’ trust, and they realize they’re also the only player in the payments chain who can see a consumer’s whole payments profile, so if they want to hang on to that they have to take the lead with rewards, too,” Brown said.
Bank of America, one of the largest players in the card-linked offers arena with its BankAmeriDeals program, says customers redeemed 30% more in cash-back rewards in 2015 versus the previous year. The majority of customers are using BofA’s mobile app to activate deals, which are automatically redeemed after making the purchase, the company said. Restaurants, apparel, sporting goods and travel are the most popular deal categories, but fuel and telecom deals are rising in popularity, according to a Bank of America spokesperson.
BofA offers the merchant-funded deals to its credit and debit card users through a white-labeled service provided by Atlanta-based Cardlytics, Inc., whose other bank customers include BBVA Compass, PNC Bank, Regions Bank and Lloyds Banking Group. This year Cardlytics is rolling out card-linked offers to thousands of smaller financial institutions through its partnership with bank services provider FIS, Brown said.
Other card-linked offer technology firms also are seeing more activity lately from banks. Chicago-based Edo Interactive provides the card-linked offer technology for 200 U.S. banks, the company said. The number of total payment card enrolled in Edo has risen 15% over a year ago, said Souheil Badran, who took over as president and CEO of Edo last year.
Edo said deals are in the works to add several new banks to its program this year, and the company also plans to launch a new model this year in Poland, in conjunction with Visa. “It’s a go-direct model where consumers register their cards under the Visa brand, not through specific banks,” Badran said.
San Bruno, Calif.-based CardLinx Association, a trade organization formed in 2013 centering on card-linking and digital commerce, is on a roll. Membership doubled last year, said Silvio Tavares, CardLinx president and CEO, and this year the organization will hold its first-ever industry meeting in Asia, adding to the list of about a dozen annual forums including in Europe and North America.
Tavares said CardLinx is seeing good results from its efforts to establish and promote technical standards for the card-linked offers industry. It’s also expanded the marketplace for merchant offers.
In the fall of 2015 CardLinx created a database for merchants and card-linked offer platform providers to share deals with digital advertising publishers. Called CardLinx Listing Information Monitor eCenter, or CLIMe, the database makes it easier for merchants to distribute offers, which is enriching the mix of offers available to banks and other digital publishers of offers like Microsoft, Samsung and Coupons.com.
“We’re seeing a global groundswell of innovation and momentum coming from collaboration within the field of card-linked offers—it’s driving scale,” Tavares said.
Most card-linked offers used by U.S. banks work this way: Banks anonymize their customers’ transaction data, feeding it into the card-linked platform technology provider’s software, which sits behind the bank’s firewall. By analyzing customers’ purchase behavior, the offers platform produces deals designed to stimulate consumer activity at specific merchant locations.
A typical offer could be for 20% off the bill—or $25 of the check—for consumers paying with a linked credit or debit card. Cash-back savings land in the customer’s bank account with a few days to a few weeks, and campaigns may run for a few weeks or a few months.
The firms providing the technology and setting up the card-linked deals typically split a portion of revenues they earn from merchants with banks, but it doesn’t compare with what banks earn from interchange. And analysts say the multiple steps card-linked offers require, and the lack of immediate gratification, are quickly becoming outdated in a world where consumers increasingly expect immediate gratification from mobile commerce.
But the deliberateness of that opt-in process is one of the only ways to prove exactly what motivated a consumer to make a purchase, Tavares points out. “Attribution of deals is a big deal, when it’s nearly impossible to measure the results of other types of advertising and marketing. Getting consumers to opt in is powerful, especially in an era when people are more concerned than ever about privacy and security,” he added.
But even with more consumers redeeming card-linked offers through banks’ mobile sites, these options are a far cry from what we’re likely to see in the future with the coming marriage of payments technology with big data, observers say.
“It’s true that banks are getting some good traction from card-linked offers, and mobile is really helping that, but our research indicates most of these offers are still fairly random in the way they’re delivered to consumers,” said Richard Crone, a payments industry consultant. “Card-linked marketing has come a long way, but it’s all very primitive compared with what technology giants like Amazon, Google, Netflix do every day in targeting offers to individuals very precisely and in context.”
The “big win” for banks would be in finding a way to harness the power of the tech giants through partnerships and deliver highly customized deals to consumers through geo-location, in-store beacons and apps, based on what consumers have said they want, Crone said.