Last week the payments industry added anotherconsortium, The CardLinxAssociation. The Association, which includes at least twoissuers (Bank of America and Discover), a network (MasterCard), asocial offer site (Living Social), several leaders in card-linkedoffers (Affinity Solutions, Cardlytics, and Linkable Networks), andMicrosoft, appears to be a cooperative designed to advance theeffectiveness and utilization of card-linked offers.
The rewards and loyalty space buzzed with excitement aboutcard-linked offers a couple of years ago partly because oneimplementation of the technology, merchant-funded offers, givesissuers a way to enhance their reward programs with minimal upfrontIT investment and almost no ongoing costs. This is of courseespecially appealing for debit issuers, whose primary fundingsource for rewards, interchange, was reduced dramatically by theDurbin Amendment. Additionally, manycompetitors, including Cardlytics and others, have leveragedventure capital investments to fund sales efforts large enough tostir the market.
Many vendors of card-linked offer technology have developed highlysophisticated analytical tools that are able to match a merchant’soffer with an appropriate cardholder, but card-linked offers haveyet to realize their full potential for two reasons.
First, merchant participation is generally limited to a fewnational chains. Vendors are still having a hard time proving ROIto merchants, and there aren’t enough local offers to make onebank’s program stand out from another’s. No matter how good avendor’s transaction analytics might be, they can’t display anoffer that they haven’t already sourced from a merchant. Second,the transaction history on a single card might not berepresentative of a consumer’s entire spending behavior. Mostconsumers carry multiple card types (credit, debit, prepaid, etc.)and often have more than one of each type.
The CardLinx Association is interesting because it could helpresolve both of these issues. Bank of America and Cardlytics arefamiliar names in the space; Microsoft and Living Social are newentrants. Microsoft is integrating the company’s Bing Card-LinkedOffers with First Data’s OfferWise Program, which potentiallyallows the platform to use a consumer’s search/browsing history tomore accurately target offers to cardholders. Additionally,LivingSocial brings a trove of relationships with both national andlocal merchants that could help build out the supply side ofcard-linked offers.
While new entrants can certainly help improve upon card-linkedoffer programs in the market today, the group might still bechallenged to come up with a business model that compensateseveryone for their contributions. Merchants will only commit somuch of their advertising budgets to card-linked offers unlessvendors can demonstrate the return on investment. At the least,collaboration in the industry, around EMV first, tokenization more recently,and now rewards, bodes well for future innovation in many key areasof payments.
