By Reda El Mejjad, CEO of Izicap, and originally published here.
They know that they have important
customer information and they’d like to be able to leverage on it. Consumers use cards for payment almost every day so they have huge information potential. Banks are therefore focusing on the privileged card sector.
The US trend known as card-linked offers cannot in our view be transferred identically to the European market. Its ability to adapt to the local context has to be considered beforehand. European consumers tolerate a certain amount of intrusion into their private lives from Google and Facebook but they may not be so lenient with their banks on the subject. The risk to reputation in transferring a US model to Europe must be analysed in depth.
There are two models of card-linked offers (CLO):
- The “Issuer” model driven by card issuers (cardholder’s bank)
- The “Acquirer” model driven by the acquirer (merchant’s bank)
The issuer model involves an in-depth analysis of cardholder’s card transactions unbeknownst to them and targeted couponing offers provided as instant rewards at participating retailers (mainly large retailers). Advertising’ offers are then published on the consumer’ online bank statements (online banking). The card holder may have the option to be removed in this model (Opt out).
This model may not be appropriate in Europe for the following reasons:
- The rate of return will be very low based on having to work as on an opt-in basis. The American model works on an opt-out basis.
- In the US, these offers are pushed on the consumers credit card statements which usually are not linked to the Bank statement. In Europe we are dealing with a debit card linked to the bank account where compliance are vigilant to third party using bank statements
- Since these offers may affect the issuing bank’s image and reputation, the subject will have to navigate the gauntlet of the Compliance department. The recent experience of ING bank in Holland demonstrates how sensitive the issue is. After stating their desire to experiment (even in opt-in) with the roll-out of CLO-style targeted offers, ING received a volley of criticism forcing them to publish several press releases to attempt to reassure the public.
- This profiling method hasn’t proven more efficient than allowing the client to express his/her expectations through more classic methods.
The acquirer model is more merchant-centric and involves less intrusive use of card details. The service is based on POS transaction data from the retailer and not the consumer’s card details. Cardholders receive the offer from the retailers they’ve purchased from so the sense of intrusion is far less and there is almost no risk to the bank’s reputation.
There’s a good chance that the acquirer model will be easier to adopt in Europe. Especially since existing players have been encouraged to adapt their offers to stay competitive following the erosion in commission on payment transactions combined with the arrival of pure players such as Apple Pay or Paypal in Store. Card-link marketing solutions provide a real opportunity to improve the Acquiring bank/merchant relationships and set-up a new revenue stream for them. These solutions can provide a real valuable support to small merchants who need a real cultural change to adopt digital marketing tools and to compete with large retailers and Internet stores.