There was a great article written for Multichannel Merchant. The article provides a perspective on the opportunities of card-linked offers including how they evolved, how they work, and what can be done to make them better.
This is a timely article too. Issuers are looking at card-linked offers, aka merchant-funded rewards for their debit cards. Most issuers experienced significant growth in debit use in 2020 and they would like to hang on to that. It’s a tough decision as the cost to manage a debit card is going up as fraud increases and as a probable interchange reduction is on the horizon for those issuers with greater than $10 Billion in assets and covered by Regulation II.
While a debit rewards program where merchants are providing the discount help to keep costs in check, these programs do need ongoing attention to keep them top of mind with cardholders which generates greater use and loyalty. Here’s an excerpt from the article:
Card-linked offers initially appeared to offer an interesting niche, but not a channel worth serious marketing dollars. After a few years, though, larger institutions such as Bank of America, Chase, American Express, Wells Fargo and Citibank realized they were here to stay. Such offers were driving some of the highest Net Promoter Scores ever recorded for banking products, an uptick in card usage and lower attrition rates from checking account customers.
At the same time, the CLO platform companies were getting more sophisticated, creating advanced targeting options, incremental sales measurement and wallet-share insights. As more financial institutions opened up their customer base and associated transaction data, the industry’s scale attracted marketing spend that had previously gone to direct mail and other digital channels.
As the card-linked offer industry grew, marketers spent even more on it. But some banks began getting questions from their customers. They wanted to know why they weren’t receiving offers for the places they shopped the most, including supermarkets, convenience stores and big-box stores like Walmart and Target
In order for customers to receive card-linked offers from supermarkets and other large retailers that rely on manufacturer dollars to advertise, it’s necessary to integrate the SKU-level data from the receipt with the bank’s transaction data — that is, to add Level 3 data to Level 2 data. If that were to happen, CLO companies could provide product-level offers (“Shop for Pampers at Walmart and get $5 cash back!”), or even category-level offers (“Buy groceries at Target and get $10 cash back!”). This would also enable more advanced targeting and deeper measurement of campaign performance, so merchants and brands can finally understand which offers work best.
It is past time for card-linked offers to evolve. When they do, customers, marketers, and financial institutions will all enjoy the rewards.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group