As financial institutions continue searching for new sources of revenue in the wake of regulatory changes and shifting consumer behavior, card-linked offers have emerged as an increasingly attractive opportunity. By connecting digital coupons and promotional offers directly to consumers’ payment cards, banks, card issuers, and merchants can create a more seamless savings experience while reducing the inefficiencies associated with traditional paper coupons. With consumers embracing mobile payments, digital wallets, and personalized rewards programs, card-linked offers are helping reshape the relationship between brands, retailers, and financial institutions while creating new paths for customer engagement and revenue growth.
We’ve all heard the phrase “follow the money” or “show me the money,” right? And that’s exactly what financial institutions are looking to do in this post-Durbin world: replace revenue. During these economic times, revenue replacement is a driving need for financial institutions and following the trail of money to the package of coupons in your weekly Sunday newspaper is proving to be a lucrative approach for these financial institutions to do just that.
Each year, about $740 billion in coupon value is distributed in free standing inserts (FSIs) – those glossy coupons for manufactured goods in your Sunday newspaper. Of this amount, only approximately $76 billion in coupon value is redeemed at supermarkets. Another $3.2 billion is spent on printing, inserting and distribution.
Even though $740 billion in savings opportunities sounds like a large amount of money, but when as little as 9.7% of these coupons are actually being redeemed, you can see that in fact, the whole system is inefficient. Consumers aren’t taking full advantage of the savings and on top of that, each stakeholder in the value chain has quite an array of issues to deal with. Manufacturers have to contend with waste and fraud, retailers have operational issues on their hands with entering in all of the coupons at the point-of-sale (POS), and consumers have to worry about clipping, storing and carrying coupons.
Now, there’s a better way. Just as iTunes allowed us a better way to access, store and listen to music, card-linked offers allow consumers to access, store and redeem coupons with ease. The secret is in linking coupons to customer’s credit or debit cards, which helps create a consumer top-of-wallet preference.
To companies like American Express, VISA and MasterCard, having their credit card as top-of-wallet for a consumer is key. This means that consumers will turn to it first for their purchases; when in-store at POS or online too, this is the card they pull out of their wallet and give to the cashier. This not only means that their card is being used the most often, but it also typically means that it will have the highest balance on it – and thus, bring in a higher interest level to the credit card company. All in all, it’s a card issuer’s dream to be top-of-wallet for their customers.
How do they get this “holy grail” placement within their cardholders’ wallets? Common practice has been to roll out costly cash back or cumbersome loyalty points programs. However with card-linked offers, banks derive a new source of revenue since consumers’ top-of-wallet preference is for the card that allows them instant savings. The points or cash back loyalty programs once funded by these financial institutions can now be replaced by tapping into funding provided by consumer packaged goods (CPG) companies’ marketing budgets. How can banks do this? By leveraging the couponing and offers that CPG brands are already putting out all year long in FSIs.
As CPGs reduce traditional media budgets and expand their digital marketing efforts, the opportunity for financial institutions to utilize these funds is growing. More and more, CPG companies are seeking to use promotions more effectively and maintain or improve margins, which leads marketers to think of digital and mobile solutions in favor of the more traditional print offers. CPG brands are getting smart about their dollars and are taking note of paper coupon redemption rates and the rise of such savings sites as Living Social and Groupon as consumers look to save when and where they can. Financial institutions and card issuers can harness this opportunity for growth as the trend pervades the manufacturer and retail world.
But is this new generation of savings opportunities here to stay? With more and more smartphones being used these days and the push for mobile payments on the rise, card-linked offers are the way to go, not only for brands and retailers but also for consumers. For the consumer, these offers and savings opportunities signify a renewed attention on the part of the advertising market and provide yet another reason for the decline of the paper coupon. For the brand, linkable offers represent another tool to increase exposure and reach out to a multitude of new consumers. There are exciting new developments on the horizon for businesses in the card-linked offers space such as Linkable Networks, so stay tuned.
Tom Burgess is a seasoned executive with deep interactive advertising and digital media technology experience. He has successfully pioneered an array of innovative advertising solutions and holds numerous direct response and offer delivery technology patents. Burgess is a frequent speaker at global marketing conferences and has been quoted or featured in Forbes, the New York Times, The Wall Street Journal, The Boston Globe, and CNBC.
