Thoughts On Cardlytics, Transaction Data Driven Reward Programs

On Tuesday, Jim Breune posted a story on his Netbanker site that discussed the potential financial windfall for banks (and presumably credit unions) through transaction data driven reward programs. His article was in response to a great open ended question from Christophe Langlois via Twitter.

Per Netbanker, this was the interaction via Twitter.

Here is the full Netbanker post.

I am sure many people in fintech expect Cardlytics to continue its rapid growth, now that they have secured a partnership with Bank of America, but will it be a windfall for financial institution partners, most of which are not direct white-label partners of Cardlytics?

What do you think? Financial windfall or not?

Here was my comment to Jim on the Netbanker site:

Jim, I love the enthusiasm (as always) and also marvel at the way you see adding $600K of additional income to our bank’s bottom line (I just paid for the channel and then some!).

Even though I really like the Cardlytics model, we need a few more things to happen. We need a few more BofA sized banking partnerships to drive adoption, we need to add more contextual and proximity based merchant modeling (and recruit FI customer/merchants to fill in categories and location).

Today, too many of these merchants are national chains and offers are not necessarily directly related to existing behavior. If you shop online and use your debit card at the Gap, does that mean that you also would use a coupon at Aeropostale? Maybe. If you shop at Target, are you going to shop at Redbox? Maybe not. Some of their targeting model makes sense, but without more merchants, they fail to deliver offers in context. The other great addition would be aggregated offers, meaning taking PFM data (read: credit card purchases) to provide FI Cardlytics clients the ability to provide discounts on non-bank purchases. Why not? We have the data. At least encourage debit card behavior at the primary FI by dipping into this feed and properly offering all relevant rewards. So we have some work to do to get 1-2 offers per customer per month. But again, I like the trend.

One other concern I would have is accessibility of the average FI to the Cardlytics platform. Are core providers like Fiserv, FIS, and online banking providers like Intuit (which offers Cardlytics through Purchase Rewards to hundreds of FIs) taking a cut of that $1-2 a month per user? Our industry has some phone calls to make I think. Check the contracts.

Congratulations to Cardlytics on their ongoing success and win at Finovate. They have a great team, and the Bank of America partnership demonstrates that (and the bank’s need for additional income streams).

We all need a bit of that.

12 thoughts on “Thoughts On Cardlytics, Transaction Data Driven Reward Programs

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  3. The ‘inner beauty’ of the Cardlytics and other programs is the ability to solicit small business and commercial customers to be a local participant in the program. I am not sure how the white label program from Fiserv works, but the larger banks could actually leverage the rewards platform as a business development tool. In addition, the new enhancements to Cardlytics and to some of the other offerings make it possible to move the offers to the text and/or email environment. I personally believe this mobile linking is what BofA will roll out with when their test is done. As I mentioned, the combination of purchase history personalization, social media insight and mobile payment integration is a value proposition that can be a win for all parties.

    1. Absolutely concur, though if BofA does launch with mobile rewards with proximity awareness, then a lot of current Cardlytics partners will be crying foul. Merchants are key, and it will be a long road toward having any one platform in the banking space be the winner (see the Groupon mess as an example). I take your point about adding additional data into the hopper for better reward generation and will be talking about some additional ideas during my webinar. Looking forward to hearing more from your panel on ‘Rewards in a Mobile Banking Environment’ (link: Have fun moderating that great session.

  4. I have been following the merchant-funded rewards model since the beginning and will be the moderator for the BAI PaymentsConnect session on this subject in March. It is a great discussion.

    As you point out, the power of the Cardlytics model (or that of Carterra Commerce, Truaxis, Segmint, etc.) comes from ‘big data’. The ability to leverage the payment behavior of each customer of the bank within the bank’s firewalls is tremendous. Not only can the bank determine where the customer shops (with a card) but also what they spend, how many times they visit, etc. The possibility of customizing offers is endless. Because of this customization, merchants will provide better offers than available through any other channel (Groupon, etc.).

    The challenge, however, is in how robust the models become, how many merchants participate (not just big box national stores), and most importantly, how committed the bank is to build a personalized loyalty program (more than rewards). If the bank believes in the merchant-funded reward program (or loyalty program in the case of Segmint), they will need to bring local merchants to the table. This provides a tremendous opportunity for small business and commercial business development since the bank can help their clients sell their products using the reward/loyalty modeling capability.

    In addition, there needs to be the eventual integration of social media insights like Segmint has built into their solution. The power of purchase data combined with social media insights enhances the customer experience and would provide a greater value to the merchant. Finally, the final piece of the ‘Couponing Trifecta’ is the addition of geolocation. To be able to offer a customer a highly personalized offer when they are near the merchant using the mobile payments capabilities of a bank makes merchant funded rewards and big data loyalty programs a big win for all parties.

    Banks must commit to this model, however, for it to be successful. It will not run on it’s own or have the ability to be customized unless the bank (as opposed to the vendor) takes the lead. When a bank starts to approach 30%+ penetration (and use), the bank will have the combination of value and engagement needed for a strong loyalty model. They will also be generating meaningful revenue at a time when banks are looking under every rock for non-fee opportunities.

    1. Jim. Great comments and additions to the conversation (thanks!). I would add your comments on netbanker as well.

      In regard to the ‘Couponing’ or ‘Reward Trifecta’ I absolutely agree that geo-location/proximity will be the absolute killer app as this model progresses. Banks must not only support these type of efforts for card revenue from interchange, but the gain in insight on how (and perhaps why) customers choose to purchase a certain way becomes invaluable to present contextual value through rewards, bank products, or ancillary partnered offers. It will all come down to initial successes, from Cardlytics, Segmint, and other partners. Look at model as well, in essence rewards through bill pay and online statement.

      I look forward to hearing more about your panel discussion, and in talking some more myself about the merchant side of the equation at the Backbase webinar I’m on on 3/7:

      Thanks again Jim. Look forward to seeing this space grow.

  5. It may also depend on the type of relationships that Cardlytics seeks – FIs or online providers. For example Intuit Financial Services (DI) partners with Cardlytics to provide debit card rewards. It provides this functionality to customers for free, but doesn’t pass on the merchant revenue to the FIs. From the FI perspective hopefully it will increase debit card usage, but Intuit is presumably looking forward to the “windfall” you mention.

    1. Jen. Appreciate the comments and insight. While most financial institutions would benefit from the interchange through card choice, until we make the relevancy of the offers more something that we can carry with us at POS, then it’s still locked up inside the box of online banking. We’ll certainly see this segment grow, as banks look for good alternatives to increase fee income and simultaneously offer value added benefits. But is this much different that the checking add-on products of the past two decades (I worked for a sister company of FISI-Madison) if the offers are not contextual and relevant?

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