This story has been updated from its original version with additional information.
Debit card issuers looking to compete with nonbank providers of mobile payments and rewards offers are going on the offensive, and merchants are helping them along the way.
In one of the latest such moves, Intuit Financial Services on June 12 announced Mobile Purchase Rewards, which enables customers of participating financial institutions to turn on merchant discounts from their smartphones and have them applied automatically through cash-back deposits into their checking account when shopping with pre-enrolled debit cards.
Intuit already was working with Cardlytics to offer merchant-funded rewards discounts to consumers for online as well as in-store shopping purchases through its online banking platform. "The integration into our new mobile application allows consumers to access their offers previously available online while on the go," Robert Silverii, Intuit Financial Services associate product manager, tells PaymentsSource.
The service supports all Apple Inc. iPhone and Google Inc. Android devices.
About 150 financial institutions are participating thus far in both the Purchase Rewards and Consumer Mobile Banking applications. Of those, some 125 already have the latest version of the mobile-banking application and are now live with Mobile Purchase Rewards, Silverii says.
Participating banks and credit unions tie the rewards program to their online banking service. Providing mobile access makes turning on the merchant discounts simpler.
“What we’re trying to do here is facilitate the engagement for [issuers’] users across multiple platforms,” including mobile and Web access, Silverii says.
The goal also is to make receiving rewards faster. For example, say Sports Authority offers 10% off when spending $50 or more. When the shopper activates the discount using his phone and spends $55, Intuit automatically through online banking will deposit the $5.50 discount into the account his registered debit card accesses to initiate the payment, Silverii says.
“There’s no paper coupon or digital coupon; everything is done in the background,” he says, noting Intuit is responsible for processing and supporting all rewards payments sent to consumers.
A February Intuit study involving some 425,000 online bankers found that consumers who use Purchase Rewards make, on average, 11 more purchases per month, generating as much as $60 per year in interchange fees for the issuer, Intuit noted in a June 12 press release. Such consumers also access their financial institution 60% more often than do users of online banking alone, providing additional cross-selling opportunities, Intuit said.
Driving the merchant-funded rewards behind the scenes is Cardlytics Inc., an Atlanta-based company that secures the discount offers and in return supplies the retailers with trend data to help them identify the shopping habits of cardholders to produce customized offers, Silverii says.
“We provide Cardlytics with ‘deidentified’ data–there’s no visibility as to where the transactions are coming from,” he says. “But they are able to identify the merchant name, category and location and use that data to help merchants set up campaigns to maximize their programs.”
The participating merchants pay for the discount offers. Consumers pay nothing to participate, and financial institutions incur no cost to offer the service to their customers, Silverii says.
Merchants that participate in daily discount programs such as Groupon often face margins that are thin or unprofitable and that don’t motivate repeat visits, Silverii notes. “This allows merchants to target users who already are customers to get them to do one or two more visits, or new ones who might not be customers at all, but to do so with margins where they aren’t losing money,” he says, referring to Intuit’s Mobile Purchase Rewards program.
Cardlytics’ program is sure to see a huge lift, given some 10.4 million customers of Intuit’s client financial institutions’ online banking services, and 1.6 million of those use mobile phones to access the services.
Indeed, the targeted marketing aspect of the program could help merchants drive more traffic as well, notes Patricia A. Sahm, managing director for consumer strategies and marketing, at Auriemma Consulting Group.
“This could be extremely attractive relative to the merchants if the financial institutions or Cardlytics could actually get it to the customer-level data,” she says. “We are going to see more of these kinds of programs because of their ability to actually fulfill the rewards is easier and as more and more people move to using mobile to manage their finances and as a payment vehicle.”
And Sahm agrees that Groupon-type offers haven’t proven their effectiveness in securing loyal customers. “There is an opportunity here to create loyalty via this type of rewards program,” she said of Intuit’s initiative. “Rewards and loyalty are two different things, but this sounds like an interesting way to develop loyalty through the rewards program.”
In May, Cardlytics announced it was extending access to the targeted merchant offers to credit card issuers as well (see story). Asked if Intuit planned to extend the service to its client credit card issuers, Silverii says "this is something in our product roadmap that we hope to offer our financial institutions in the near future."
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