Visa and MasterCard kicked up major controversy in October when plans to start selling marketers and advertisers data on customer transactions leaked to the press. The idea of transaction-driven marketing isn’t all that new, but finding a way to implement the practice in a way that benefits companies while protecting consumers’ personal information is partly why it gets consumers (and regulators) so riled up.
It’s a fine line Lynne Laube, president of Cardlytics, has been toeing ever since she co-founded the company four years ago.
The Atlanta, Ga.-based company works as the middleman between banks and merchants to offer consumers deals and discounts based on where they spend their money.
“(Consumer protection) is one of the things we’re most concerned about,” Laube said. “This is a brand new industry. As it evolves, there will be good practices and there will be bad practices. We think there is a risk people will do this in a ‘bad practice’ way.”
She took time to help break down the nuts and bolts of transaction-driven marketing.
How it works
Cardlytic’s concept is simple: When you check your bank account online, you will see a notice next to, say, your $20 Taco Bell purchase that offers a 10% discount for your next visit.
The next time you swipe your credit or debit card on a 2 a.m. burrito run, the transaction automatically shows up on your account with a notice that you’ve unlocked your deal. Because the deal is applied directly to your account, there are no coupons to hand over and nothing to show the cashier.
“(People who check their bank accounts online) are thinking about what else they’re going to buy and mentally saying, ‘Can I afford to go out to dinner tomorrow night?'” Laube said. “It’s a great time to talk to people and give the relevant ways to save money.”
Once the deal has been unlocked, the money you’ve saved will automatically be shifted into your checking or savings account once per month.
Impact on your privacy
Unlike Visa and MasterCard’s rumoured plans to sell consumer data to marketers, your account information never leaves the bank’s protection.
The only information Cardlytics keeps is your zip code, which they use to pump deals from local vendors to your account.
“It’s the bank’s job to be the custodian of that data,” Laube said. “To take what someone’s 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.”
If a consumer isn’t a fan of the Cardlytics’ feature, they are able to opt out with a one-button click. So far, the company’s seen only a 1.64 per cent opt-out rate from the 20 million households that participate, Laube said.
What’s in it for them?
Visa and MasterCard’s motives for wanting to sell consumer data to marketers is pretty transparent: Major credit card companies took a pretty bad beating after lawmakers imposed new limits on transaction fees they can charge retailers.
The year-old Durbin rule, which capped bank fees on transactions at 21 cents, was the main reason big wigs like Chase and Bank of America recently launched ill-fated campaigns to charge customers $5 monthly debit card fees.
Bigger banks have been slow to piggy back on the transaction-driven marketing trend, but as their plans for debit fees have so far backfired, interest could start to grow as companies look for more creative ways to pump up revenue.
Cardlytics already works with more than 160 regional banks, including Regions and Intuit, Laube said.
Retailers were a little easier to convince. Cardlytics works with 100 of the top 300 retailers in the country, which benefit by luring customers back to their shops with little effort on their part.
Since you receive deals that match your purchase history, you won’t be inundated with offers that don’t interest you and the retailers won’t have to bother paying postage for ads some people will never use.
Cardlytics is ramping up efforts to cater to local businesses as well, Laube said, which could be a boon for smaller shops trying to compete with big-box retailers this holiday season.
Should you worry?
The chances of banks being allowed to sell your data to advertisers without your consent is highly unlikely, especially with the new Consumer Financial Protection Bureau hot on everyone’s heels.
Banks and credit card companies are sitting on a potential gold mine of user information—the kind of hyperlocal analytics that marketers would kill for. And If they are able to come up with a safe, secure way of harvesting that data into a real moneymaker, it could mean fewer fees for consumers down the road.
“I think banks recognise the purchase data of customers is a powerful and if used correctly can bring real value to customers,” Laube said. “But they have to do it in a way that protects data and privacy.”