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 coupons.bankofamerica.com 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.

Colloquy.com 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.