Cardlytics has created a merchant-funded offers engine that uses a bank customers shopping transaction data to tailor instant coupons and deals that appear in the online banking statement. Lynne Laube, president and co-founder of Cardlytics, tells Charles Davis about its plans
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The relationship between US banks and the merchants they serve has reached the point of near-total acrimony, with retailers protesting the fee structure undergirding the relationship while banks feel as though their efforts to handle an increasingly complex mix of payments gets short shrift.
Atlanta-based Cardlytics thinks it might have developed a way to cool the rhetoric: a merchant-funded offers engine that uses the bank customers shopping transaction data to tailor instant coupons that appear in the online banking statement.
If the customer clicks on a deal, it is then triggered when they shop with the banks credit or debit card at the merchant that provided the offer.
The consumer gets verification the next day that the offer has been redeemed, and the discount is applied as a credit to the consumers account at the end of the month. Merchants pay only if the transaction is completed.
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By GlobalDataThe company, which calls the technology transactional marketing, is working with more than 200 banks, including Bank of America, PNC and Regions Financial, said Lynne Laube, president and co-founder of Cardlytics.
Ive had merchants tell me this is the first time they have seen value from the transaction data they send down the pipeline, Laube said.
This can bring merchants and banks together around a system that benefits both sides of the retailer-merchant chain and of course appeals directly to consumers as well.
Laube said merchants are eager to see added value from the data flow, and are reasonable about the cost of electronic payments, despite the recent rhetoric surrounding interchange.
Retailers understand that there are costs, and they dont want to go back to paper-based payments, but what gives them angst is that they have very little control, and they want more transparency, she said.
All parties understand that we dont have to do every thing at the expense of the consumer.
The Cardlytics system is aimed squarely at the daily deals phenomenon triggered by the sensational growth of Groupon, but offers significant advantages.
Most importantly, the Cardlytics system generates offers that customers can redeem at the point of sale without the hassle of remembering to print and present a coupon.
And marshalling transaction data to generate offers allows merchants to better target offers to distinct customer segments, identify potential customers currently shopping at other retailers, and even drive sales of particular product lines by narrowcasting offers at customers most likely to buy.
Transactional marketing taps into the most precise kind of consumer segmentation possible: the shopping behaviour and spending levels of consumers.
Based on analytics of debit and credit card transactions by banking customers, Cardlytics allows the marketer to segment a large consumer base in a given geographic area based on where they shop, how much they spend, the frequency of their spend and a host of other variables.
We have learned through this system that consumers are less loyal to a particular merchant than people think, but really loyal to categories, Laube said.
If you like to eat out a lot, you spread your business around among a number of merchants, and youll spend elsewhere if incentives exist.
If you spend a lot on clothing it may be that share of wallet is going down but sales look the same, so we have to think about what consumers are doing in other stores as well.
Laube said that Cardlytics is in the midst of creating a national sales force to augment national offers with local deals.
We have discovered that we do two to three times the business in cities where we have the local and national mix, so when you have the local offers in the channel, you have more of a mix, from oil changes to dry cleaners, pizza parlours and local pubs, she said.
Because we have adequate scale now, we can deploy a local sales force in most of the big cities. We have local sales staff in the top 35 MSAs in the country, and we are working to grow the local business even more.
Cardlytics also is sizing up the international opportunities for transactional marketing. In September 2011, the firm announced a partnership with Groupe Aeroplan (now Aimia) in Canada.
Aimia owns Canadian loyalty programme Aeroplan, which has a significant established merchant network. It will enable Cardlytics to use transaction-driven marketing to improve rewards offers to consumers.
Cardlytics also recently opened an office in the UK, and Laube said its business model has been vetted by all of the leading European privacy councils.
Merchant-funded rewards programmes have an advantage because they are operated directly with banks, making use of anonymous transaction data that remains the property of the bank, Laube said.
Because it raises no privacy issues, the system can translate into any payments market, she said.
The bank remains the custodian of that data. To take what someones doing inside a bank and take that outside of the bank, you only want to do that if the customer acknowledges it and accepts it.
Customers can also opt out of the system with the click of a button on the online statement, but few do. The opt-out rate for more than 75 million households is less than 2%.
We know people shop, but we dont know what they buy. Neither the merchant nor Cardlytics knows who the cardholder is, and some other big retailer does not care who they are. They just want to sell products in a smart way, Laube said.
There really is no better predictor of what people will buy than what they bought in the past.
