Are Card-linked Offers the solution to a decreasing interchange? (part 4)

16 December 2015

Part 1 focused on the context for emerging card-linked offers and their definitions.
Part 2 looked at the analytical and sourcing capabilities that card-linked offer solutions should bring to the market.
Part 3 shed a light on the business model related to Card-linked offers / card-linked promotions solutions.

Part 4 ends this series of posts with insights on the key success factors to implement and run card-linked offers.

A successful card-linked offers program is one that brings benefits to the main participants:

  • Consumers are expected to take up the offers so the value, quality and relevancy of the offers is critical
  • Merchants are the one funding the offers so they should see a quick return on investment in the form of increased sales
  • The bank is expecting to see more card usage which leads to increased interchange revenues and higher cardholder satisfaction

There are two key success factors in making sure cardholders take up the offers:

  • A great customer experience –usability, friendliness, frictionless- in the way the offers are marketed and published via emails, web sites, mobile channels
  • Relevancy of the offers which rely on the sophistication of the predictive analytics and analytical tools

Two more key success factors ensure that merchants who fund offers see a rapid ROI:

  • Tracking of the transactions that triggered an offer to see all incremental impacts. Optionally, tracking the conversion rate or rate between the number of offers being clipped and the number of offers being actually triggered.
  • A large customer-base so that scale/volumes make a difference in the final outcome

Finally, the bank sees an increase in card usage when:

  • The card-linked program is positioned as a loyalty program from the bank, tightly linked to specific card products which should become top of wallet.
  • The type of merchants fits the correct channels: big, large national merchants for online card-linked offers and medium size chains and local merchants for offline card-linked offers
  • The type of merchants and offers fit the correct bank segments

Vendors who can bring capabilities related to precision –advanced analytics for a better targeting of offers-, scale –a large end-user base for merchants and a reasonable number of known-brand merchant s for banks-, regular animation –a regular flow of valuable offers funded by merchants-, great user experience and ease of deployment are poised to win the game.
So, are card-linked offers the solution to a decreasing interchange? Yes, when such program is well executed although it can’t be built overnight.

Are card-linked offers a solution that will last long? If physical cards disappear and be replaced by digital or mobile wallets, card-linked offers will certainly evolve with the same rapid pace as the evolution happening in the world of payments:

  • Through mobile wallets or apps, consumers will increasingly have a direct access to merchant-funded offers which are not related to a card, as seen with the Starbucks mobile application example.
  • Mobile wallets which contain several payment methods - my debit card, my credit card, my pre-paid card and possibly an access to my current account- may display consumer-linked offers rather than card-linked offers as end- users may not really care about the final payment method being used.