Coupon Overload?

Best Bank Coupon Service? Bank of America wins hands down

FSIs and Card networks have finally gotten in the coupon/rebate game..  sort of. Most have implemented along the lines of what I wrote about 2 years ago (See Googlizaiton of FS). Exception is Bank of America.. they have the best bank service by far.  Merchant level incentives (ex 15% off your next purchase) seem to be the focus of Visa and Amex’s LevelUp service. Cardlytics provide a generic white label service along these lines to over 50 banks today (with much better usage than Visa/Amex). From my previous blog above, the general flow:

1. Customer registers for service (credit card, mobile, ..) Accepts terms that allows for delivery of x advertisements  per month

2. Card Network acts as agency, coordinating merchants, promos and marketing spend

  • Merchants pre-pay for campaign settlement account
  • Cardlytics develop target promo and bid criteria: customer location, demographic, event transaction, …
  • A campaign function sits at “Network Switch”, listens to transaction traffic
  • Card transaction events are triggered based upon card registration status
  • Event gets sent to campaign engine.  AD triggered based upon criteria (Example. Shop at EXAMPLESTORE in next 5 hours and get 20% back)

3.  Redemption/ notification – Redemption server monitors transactions at Switch or at Bank Issuer Auth server

  • If Card transaction is for registered card it is sorted
  • Redemption engine finds that it Ad was sent to it, determines if transaction at EXAMPLESTORE meets threshold
  • If it is met, Campaign engine kicks transaction to MerchantAdvert service which bills merchant for AD and debits account for 10% credit plus fee.
  • Engine issues 10% credit to customer’s card account
  • Engine debits merchant account for fee + redemption amount
  • Notification message sent to customer that their card account has been credited for purchase and 10% discount.

Good news for merchants is that they pay only for purchases. Great CPA here. But a very poor customer experience.. getting credit either directly to your card.. or in Amex’s new program to a separate pre-paid card. Other limitation is that there can be no item level discounts.

Quite frankly I like Bank of America’s service much, much better. They are light years ahead of the other banks thanks to the efforts of people like Joe Giordano. Today, Bank of America customers can click on a coupon in and when you go to the grocery store, the discount item comes right off your bill. The company behind this is Zave Networks. Just fantastic stuff. Zave was the only company in IBM’s booth at the National Retail Federation (NRF) show. Given that IBM has 19 of the world’s top 20 retailers using its POS;. it is little wonder that IBM has embedded Zave in their OS.

Having run the online channel at 2 of the top 5 banks, I have a little idea of customer behavior and preferences. Banking customers visit frequently and may be able to have uptake of incentives, card customers have terrible online usage.. (1-2 times per month).. which is why the card companies are launching mobile services in cards so aggressively: they are trying to establish a new mobile behavior (ex mobile alerts on balances). The card coupon/incentive approach seems to have substantial risk, particularly when considering the poor customer interaction (on credit card), together with the very narrow market for incentives (apparel, restaurants), the competencies of the bank teams groups (campaign management) and customer preferences for debit. estimates that Banks and travel related industry spend about $48B per year on loyalty. Banks are running coupons programs primarily out of their existing “rewards” groups… with the hope of juicing rewards, as they reduce costs. With Debit interchange going down to $0.12 you can see the importance here.. either no rewards program at all, or one that is funded by another source. With Credit, loyalty programs are the primary customer driver both for card selection and use. Bank driven loyalty programs typically focus on redemption, not on the front side of selection. In other words, banks do not touch a customer prior to a purchase, but incent them afterwards.

From a retailer’s perspective what is the value of participating in a bank run a loyalty program?  Segments like apparel may gain traffic, but do you want your bank sending you an SMS ad for 10% off a nearby retailer/resturant everytime you pump gas? Possible, but more likely you will use the offerings from Google, Apple, Microsoft integrated with maps and comparison pricing. 10% off what? What do they have that I need? Most retailers are not big fans of banks, or their “incentive” plans. There are exceptions, particularly in apparel and restaurants (note restaurants are not considered retail). Overall this is less than $5B of $750B in US Marketing spend. I give the bank led initiatives about 6 months. When Google, Apple and MSFT come in with much richer services and focused teams. How many banks do you know with an campaign management group? … exactly. Visa had a tough time expanding into eCommerce (hence the CYBS acquisition), what makes them think they can run an advertising agency?

Sorry Amex, Visa, Cardlytics, FreeMonee, … Card driven models will have a very short life span. Exception is BofA both because of the bank (deposit) driven model and because of the item level integration with a partner (Zave/IBM) that knows retail. BAC will likely continue reign as  king of debit.. and even gain momentum.

5 thoughts on “Coupon Overload?

  1. Tom, agree BofA coupon site has good look and feel along with good redemption process. But problem is “offer discovery.” How many people are going to spend time navigating to “” to surf for deals? I’m sure BofA will solve this soon….they key is integration into the user’s normal flow of interacting with statement info whether that be online, mobile or PS3 console.

    BTW, according to Compete, there are less than 1,000 monthly unique visitors to the BofA coupon site.

  2. Jim, as usual I agree with you.. but they have the redemption part right. Lets see if they can manage the campaign. Give them 2 more months.. think you will see progress.

  3. Tom, based on my research in this market I find your perspective incredibly ‘media – like’ for a banker. The problem with most of the new loyalty/coupon deals on bank sites is that they are, well, on the banks sites in the first place. As both you and Jim point out, there is extremely low traffic in this environment with card customers having terrible online usage.. (1-2 times per month) . The overall concept is great for the consumers, getting special discounts through their bank card issuer, but why restrict them to merchant level offers only available on the banks web site? Merchant and SKU/Mfg level offers should be available wherever the card holder goes, online or off, as part of the current advertising networks. This expands the loyalty program well beyond the traditional touch points of the bank, guarantees high traffic for the brands and puts offers in front of the consumer when they are in the purchase consideration mode (not online banking mode). Bottom line, card linked offers as a new type of advertising unit (merchant and SKU level) is the future of card holder loyalty. The banks benefit from significant reach and frequency to their card holders, consumers get offers when they need them and brands get a new model of attribution (a holy grail ‘need’ for ad spend tracking – topic for another blog post).

  4. Tom N first of all great early posting of the Isis challenges. Even if you weren’t right on 100% of it you broke it down publicly in a way that most wouldn’t have.

    As for coupons/incentives/lead gen this post is perfect. As we all saw at Finovate this week (thanks again Jim) offers and FIs are a bit of a story right now. Links of web pages or deal emails will only get you so far. Online malls have always been challenged and not differentiated from the user’s experience. Don’t even get me started on SMS push campaigns based on geo-fencing. If you are an FI, don’t sign a contract that has push SMS advertising that is more than 12 months long. FreeMonee or Groupon lead gen is one thing but long-term engagement / loyalty is going to leverage the amazing technology that is happening on mobile and in payments.

    As Tom B said the consumers want the seamless experience and have a high bar for anybody providing a solution. The banks and credit unions have an opportunity to get customer’s attention in real time, especially as people move away from the desktop and their rewards/loyalty/card groups should take advantage. Local merchants can start to play if you lower the campaign hurdles through good technology and publishers will improve campaign creativity for big box retailers.

    If i can channel my hallelujah preacher voice, “there is a better way, we have seen the future, come with us people, be a part of a better customer experience.” Looking forward to seeing and working more with the early adopters.

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