What Banking Needs to Become

In this quarter's Strategy + Business Magazine, Vanessa Wallace and Andrew Herrick discuss the significant changes in the banking industry over the past few years and how bank's business models, capabilities and practices must change as well. In their very good article, they emphasize that the purpose of banking and the needs of the customer have remained relatively consistent with regards to safe havens for savings and consistent access to credit for investment.

The environment has changed, however, with the competitive landscape changing, the regulations increasing and the public trust eroding. In addition, the times of high growth have ended.
They argue that banks will need to revert back to a much more simple value chain, where there are far fewer intermediaries between the customer and the bank. In short, banks will need to get closer to the customer.

From a marketing perspective, they propose that leading banks will need to sharpen their capability for capturing customer information in a timely manner. This means analyzing customers’ product holdings, cash flows, behaviors, and personal circumstances. Depth of relationship will be more important than breadth. It will be more valuable for a bank to have an 80 percent wallet share of 1 million customers than a 10 percent share of 8 million customers. Greater wallet share permits greater insight into buying patterns, credit risk, and loyalty, enabling a stronger, more profitable lifelong customer relationship. For their part, customers will find that scarce credit lines are more accessible when they concentrate their banking activities among fewer providers.

In addition, banks will have to innovate to better serve the needs of their more loyal customer base. This will take the form of better cash flow management tools that utilize multiple channels. In addition, the emphasis on insurance and investment services will most likely increase since the goal will be to serve all of the client's financial service needs.

Consumers will be rewarded for their loyalty with better rates, fewer fees and easier access to scarce credit.

Building Long-Term Deposits and Relationships Automatically

Over the past several years there have been a number of financial institutions that have built automatic savings programs where customers can set goals, establish recurring transfers between accounts to fund the goal(s), and track their savings progress.

One of the first programs developed was the Orange Savings Account from ING Direct which greatly simplified the process of opening new accounts for various savings goals. Following the success of the Orange Saving Account, SmartyPig was another program with that same goal in mind, making it easy for a customer to setup savings goals.

A customer can name their accounts, set the deadline for reaching their goals and even use an interactive calculator to determine the amount they will need to set aside each month. What makes Smartypig unique is that they added a social element to the mix . . . allowing other people such as friends and family members to contribute to the customer's goals as well.

The customer can even place a widget on their Facebook or MySpace page. Once the customer reaches their goal, they can either put all of your savings plus interest on a debit card, have it sent back to their bank, or receive bonuses by having the amount placed on a gift card from participating merchants like Macys, Amazon, Best Buy, etc.

While SmartyPig brings unique technology to its enterprise, it remains a one trick piggy (offering only savings accounts) and is a still-small Internet start-up. Being able to grow a savings account product from $0 to $500 million in deposits in less than two years is a phenomenal feat but its success can be assailed.

Full-service banks have begun to copy some of SmartyPig’s basic features and leveraged their own new savings features. For instance, U.S. Bank introduced the S.T.A.R.T. (“Savings Today And Rewards Tomorrow”) program in late 2009 in test markets, giving a $50 Visa gift card to a customer depositing $1,000 or more into a U.S. Bancorp money market savings account and establishing a monthly transfer from their U.S. Bank checking account. If a customer chooses to transfer between $.25 and $5.00 from their checking account into his money market savings account each time he uses his U.S. Bank debit or credit card, the S.T.A.R.T program counts those toward program term fulfillment.

In addition, customers maintaining a minimum $1,000 balance in the new savings account for 12 months will receive another $50 bonus, while U.S. Bank is offering another $100 bonus for establishing an automatically funding savings account tied to the bank’s standard checking account.

Building new products that encourage a long-term savings perspective supports the current trends toward more conservative money management while providing tremendous opportunity for additional cross-selling and relationship building. I fully expect more banks to develop both online and offline savings alternatives and to use these products as part of their onboarding and lifestage communication processes.

Mintel Comperemedia Looks at Financial Service Mega-Trends

In a Mintel Comperemedia presentation recently, Economic Psychologist, Susan Menke, PhD. presented the trends that are expected to have the greatest impact on consumer financial behavior and the banking industry during 2010. Based on tracking of direct marketing programs during the last half of 2009, the following predictions were made:

• The end of Free Checking: Banks such as Fifth Third and BBVA have already eliminated the account while Free Checking leader TCF announced the end of their Free Checking program at their investor meeting this week.
• Explosion of reward banking: The decline in Free Checking will most likely result in an increase in checking programs with rewards, especially in light of the increased importance of direct deposit, online bill payment and debit card interchange.
• Account builder program introductions: Following the trend started by 'Keep the Change', 'Way2Save' and PNC's 'Virtual Wallet', automatic transfers from checking to savings and the linking of credit lines to checking will be two ways to expand relationships beyond a single service.
• More aggressive debit card marketing: The importance of interchange income to the financial viability of many relationships will lead to many more debit card activation and utilization promotions in 2010.
• Cash will continue to be king of offers: The offering of cash incentives for opening new accounts ramped up in the latter part of 2009 after a short hiatus. Chase continues to offer different bounties ranging from $100 to $200 and more with many other large banks following.
• Increased popularity of prepaid cards: While larger banks have not yet focused on prepaid cards, changes brought on by Reg E may change the way banks serve the underserved and unbanked segments.
• Expansion of mobile banking: There are still several large banks that have only rudimentary mobile banking initiatives while others such as Bank of America, Wells, USAA and Chase have created innovative iPhone Apps. The financial incentive to move more expensive transactions to the mobile channel and the rapidly increasing acceptance of smart phones is expected to fuel rapid growth of this channel.
• Proliferation of financial literacy programs: Customer experience research for years has indicated the importance of being more transparent, building trust and educating customers on how to make informed financial decisions. Mintel believes that 2010 will be a watershed year for banks to use customer advocacy as a competitive differentiator.
• Increased use of social media sites: The popularity and growth of social networking sites has made it impossible for financial institutions to sit on the sidelines. One firm is offering a service where customers can receive alerts through social networking sites rather than email while many banks are using these sites for enhancing or reinforcing their brand. Twitter is also used to broadcast changes in rates and to introduce new products.

Unlike 2009, where most banks significantly scaled back marketing efforts and were on the defensive, proactivity seems to be the norm in 2010. Product innovation, changes in pricing models, utilization of new channels and an increased emphasis on the customer experience will definitely put the spotlight on marketing.

Capital One Continues to Innovate

Historically an aggressive marketer and innovator in the credit card industry, Captital One has expanded its reach in recent years, using their growing banking franchise as the foundation for introducing innovative banking products. In addition to having a relatively rich debit rewards program and expanding into online and small business banking, they have recently introduced a new savings product called "InterestPlus Online Savings".

The saving program offers an above market interest rate on balances over $2,500 in addition to a 10% quarterly interest bonus payment paid if the customer uses their Capital One credit card once a month.
The bonus can also be earned if the customer maintains a minimum balance of $15,000 each month. The bonus for using the credit card is similar to other promotions done by Captial One in the past 12-18 months to cross-sell services and relationships off their credit card foundation.

The promotion of the new service began in December of last year through the bank's web site, statement inserts, direct mail and with email according to Comperemedia. Using strong visual elements such as comparative bar graphs and icon buttons similar to what I have seen with ING mailings, it is clear that Capital One plans to leverage their strong marketing talents from the credit card industry in building a strong bank brand.

Five Steps to Improved Customer Engagement Through Email

According to Peter McCormick, co-founder of one-to-one communications firm ExactTarget, there are five steps for engaging customers via email.

1. Express Gratitude: According to McCormick, fewer than 50% of marketers send a welcoming email thanking a customer for accepting communication from a brand. This should be the first step after a customer provides their email address. This communication also sets the tone for future dialogue so this is a great time to include a coupon for expansion of the banking relationship and/or a research report or white paper for a B2B client.
2. Take a Genuine Interest: Let the customer tell you about their communication needs and interests to enable more relevant content delivery. A preference center can achieve this where a customer expresses what they want to know going forward.
3. Let Customers Talk and Share: Embed social network icons directly within your email that is sent so your customer can share offers and research with friends. In addition, invite customers to contribute to your bank's blog.
4. Know Your Brand Advocates: Reward those customers that respond to emails, contribute to blogs and share your offers. Expand the loyalty and engagement by inviting those customers who are brand advocates to special events where they can further discuss and share their experiences. Email provides the springboard to a much stronger social media strategy.
5.  Build a VIP Area: Create private subscriber-only access to social networking groups, events, and special resources that address the needs expressed in step 2. This heightened level of engagement not only rewards the customer for their loyalty and engagement, but also provides a source of insight not available through traditional channels.

There is no doubt banks are getting better at leveraging the power of email and social networks. The most progressive organizations are now beginning to differentiate their email communication based on customer engagement and benefiting from improved insight which can assist in future customer service and product development.

U.S. Bank Introduces Customizable Small Business Rewards Card

Looking for a way to help small businesses improve their business, U.S. Bank has teamed up with online print and personalization supplier Vistaprint to provide credit cards that can support the brand of the small business while helping the business earn rewards on their purchases.

Once a small business enters the new custom credit card area of Vistaprint, a small business can select from one of hundreds of industry specific template designs already provided or they can design a credit card from scratch. By following easy directions, the small business can expand the impact of their brand every time they make a purchase.


As part of the rewards program, cardholders will earn one point for each dollar of net purchases on the card and they can redeem points for merchandise, gift cards, travel or account statement credit. They also can receive discounts on other Vistaprint products by using their custom credit card.

As banks try to more effectively acquire and serve small business customers, building innovative third party partnerships and private label solutions to help small businesses improve their business will be a way to set a bank apart in the marketplace.

BAI Checking 2.0 Executive Forum Recap

I just finished presenting at the second BAI Checking 2.0 Executive Forum in Chicago where close to 50 financial institutions learned about legislative changes, customer perceptions, new product development and marketing opportunities around the checking account. While only a month has passed since the first Checking 2.0 Executive Forum held in Atlanta, it is obvious that there are a number of changes occurring in the marketplace.

There was consensus among the participants that while consumer trust and confidence in banks has been negatively impacted by the events of the past two years, there may be some uptick in these measures over the next few months if financial results continue to improve and if banks continue to focus on the customer experience.


A significant change from the March event was that virtually all of the participating banks have developed an alternative version of 'Free Checking'. Checking account product innovation has added stipulations to some accounts, benefits for a fee on others and alternative reward structures on other checking programs. In fact, in a quick survey of the participating banks, it did not appear that any of the 'Free Checking' programs were similar.

When discussions moved to how banks are responding to Reg E, there were some organizations that were well on their way towards communicating with their customer base while other banks had not yet begun their information dissemination. Surprisingly, MB Financial out of Chicago shared that they had already achieved close to 85% opt-in from their customer base (and nearly 100% from new customers) by leveraging a combination of postcards, traditional direct mail, phone call follow-up and branch level involvement.

The success of some of the participating banks illustrated the importance of a multi-channel communication process with strong employee involvement and call center follow-up.

Chase Uses Safety Message to Promote Signature Debit

Chase Bank has recently reached out to their converted WAMU customers who are receiving a newly branded debit card asking them to "always select 'credit'" when paying for their debit card transactions, stating that the transaction is actually safer than entering a PIN.

The slightly confusing message has not gone unnoticed by industry experts who have come out on both sides of the argument around safety. According to an article in the April 21 edition of American Banker, consultants from Gartner and Aite believe that the PIN provides an added level of security, and that the Chase message may be driven more by the opportunity to generate the higher interchange income associated with a signature based transaction as opposed to a PIN transaction.


Alternatively, Marite Ferrero, CTO of France's CardSwitch Technology, stated on April 22 that he believes the pen is mightier (and safer) than the PIN since fraudsters who skim a customer's mag stripe can use the captured PIN to perform non-personal transactions at an ATM and online.

Whether the Chase message resonates with customers as much as the significant incentives and rewards offered by Chase and most other large and small banks for signature based transactions remains to be seen. From what I have heard in my travels over the past couple months, however, the Summer and Fall spending seasons will most likely see a significant uptick in mass media and direct marketing promotions to get customers to change their debit card transaction habits. With Reg E expected to negatively impact fee income, almost all institutions will need to find new ways to cover the cost of checking and related services.

Cardlytics Introduces Bank Statement Innovation

At a time when banks are looking for ways to generate new revenue and increase customer loyalty, Cardlytics has developed a way for banks to leverage transaction data to deliver targeted offers to clients on their online bank statements.

Since the privately held company launched the innovative product last November, more than 100 marketing campaigns have been run, reaching half a million bank customers. According to a recent AdvertisingAge article, the company expects to have 50 to 70 financial institutions on board by the end of the summer, reaching some 10 million customers by the end of the year.

The program uses transaction data such as the date and amount of purchase, location and merchant to develop special offers by the merchant where the transaction occurred or by a competing merchant in the same category. Imagine an offer from a local restaurant appearing on your statement after a recent purchase from the same establishment. Or maybe an offer from a competing eatery.

The activation of the offer is electronic without any special processing by the bank or retail institution. When the offer is activated by clicking the area on the online statement, it is converted the next time the debit or credit card is used at the participating merchant and the purchase is processed by the bank.

The merchant pays for the online ad to Cardlytics, with a pay-for-performance model with the bank getting a piece of the action. Initial response rates for the program, according to Cardlytics has been very favorable, with the only drawback potentially being the lack of demographic data available for targeting.

This type of turn-key rewards program could expand quickly, using the same type of model and insight that is used for Google with their paid advertising. The success, however, will hinge on a combination of the banking industry's ability to embrace a push-based retailing concept and the customer's acceptance of a perceived sharing of data. As with most new online concepts, acceptance will most likely vary by segment.

Is Cash Really King?

The competition is again heating up in the checking account cash wars. In addition to banks that have traditionally offered cash incentives to open checking accounts such as JPMorgan Chase, Capital One, Fifth Third and PNC Bank, banks that in the past have offered premiums for the opening of new accounts like KeyBank are now also joining the money for checking acquisition game.

While incentives with some institutions are still $50-$75, many of the more aggressive institutions are offering rewards of $150-$200 to new customers that open accounts and meet some qualifying stipulations such as signing up for direct deposit, online billpay or a minimum number of signature debits. A recent program by Capital One offering $300 for a new account was the highest premium seen in years.

In a review of recent checking campaigns using the search service Mintel Comperemedia, more and more firms are offering the higher incentives. The question remains whether these high incentives pay off.

According to a 2009 study by Novantas, as many as 50% of new checking accounts are usually inactive when analyzed by looking at debit and credit transactions on the new account. In addition, the BAI has fielded many studies that find that as many as 30-40% of new accounts are closed during the first year. Unfortunately, many banks that I visit do not measure the new account activity level or rate of attrition as thoroughly as they measure the number of accounts that come in the front door. If measured using a full year view of the acquisition costs of new accounts, it is possible that some banks are paying double or triple their cash incentive for new relationships which may make the programs unprofitable from both a short and long term perspective.

It may be a more prudent strategy to reallocate this investment to strengthen current customer relationships through cross-sell and up-sell programs instead of attracting short-term, opportunistic customers with such high incentives.

Interchange Amendment Could Change Reward Programs

As if we haven't seen enough regulatory changes over the past 12 months with the Card Act and Reg E, now there is the possibility that Washington will limit interchange fees for debit transactions.

As noted in a recent Client Briefing from Celent Research, part of the proposed legislation requires the Fed to determine a “reasonable and proportional” interchange fee, which is no easy task given that interchange fees are there to balance the incentives in the payment system and tend to cover such difficult-to-quantify items as the payment guarantee and convenience.

In other words, the government can't look at just the operational and fraud prevention costs. In addition, current interchange fees differ by sector and are not standardized currently.


As was the case with the other two payments legislations already enacted, the idea behind the interchange amendment is to protect the consumer and lower prices (in this case, the thought that merchants will pass the banking savings on to the consumer). Given the financial times and the narrow margins at many retailers, the passing along of reduced costs is unlikely. In reality, the consumer is likely to lose on many fronts.

If interchange income is legislated at a lower level, banks will most likely raise fees on alternative services to compensate. So instead of the merchant picking up some of the burden, the consumer will be directly impacted. In addition, with more and more banks heavily promoting rewards programs on debit cards, these programs will need to be significantly restructured or eliminated altogether. This may have a bigger impact on smaller banks and credit unions than larger banks where costs can be spread. Some banks may be forced to stop issuing cards which is why community banking associations and CUNA are aggressively fighting this proposed bill.

In the end, banks will most likely be forced to find alternative revenue sources and potentially new ways to structure rewards programs with stronger merchant involvement. New programs such as that offered by Cardlytics (covered on April 29) or fee-supported rewards programs such as the program at KeyBank may be viable alternatives.

Post Financial Reform Checking: Fee, Free or Wait and See?

With August 15 in the rear view mirror, the impact of the new regulations around overdraft protection (Reg E) are beginning to be played out in the marketplace. While most of the larger banks, such as Bank of America, Chase and Wells Fargo have declared an end to free checking without stipulations, most small and some regional banks such as US Bank, Suntrust and Capital One have left the product unchanged while many of the large regionals such as PNC, KeyBank and others appear to be adopting a wait and see approach.

In fact, according to research released this week from Moebs Services, only 63.6 percent of the largest banks currently offer free checking compared to 92.6 percent in 2009, while community banks’ use of free checking declined only declined from 78.3 percent to 71.7 percent.
As an industry, the offering of free checking dropped by 11 percent over the past year according to the study. This differential based on the size of organization may reflect the desire of the largest banks to improve the cost structure of their checking portfolio, while the offering of free by smaller banks may be a competitive repositioning of the free checking account as a possible counter to the national branch network advantage of the larger banks.

As I discussed in a BAI webinar this week entitled, Checking 2.0: Revenue Opportunities in a New Regulatory Environment, with the cost of maintaining a checking account being several hundred dollars a year, it appears that free checking, along with rewards programs and other benefits, could be the first major consumer banking casualty, as many banks reevaluate their checking continuum in the wake of the government’s financial reform.

But, is getting rid of free checking a good strategy? According to most research, free checking still has a strong appeal across virtually all demographic and economic segments. It even has a positive contribution margin (including the impact of Reg. E, Durbin and the current interest rate environment) when you remove shell accounts with little or no activity. Would it be better to eliminate some of the perks that have been added over the past few years such as free competitive ATM transactions? Many banks are also beginning to charge an annual fee for their rewards program after a first year fee waiver for their programs. Still other firms are considering removing rewards program offerings from their entry level free checking program.

Another way to offer a free product within your checking continuum is to offer free accounts only to customers opting for totally electronic accounts (ATM deposits and withdrawals, online statements and billpay) or to your most active or high balance customers. Bank of America is testing and electronic based checking account currently, where all fees can be avoided if the customer opts for electronic statements and does not use the branch for routine transactions. With a mobile banking customer base of over 4 million households, I suspect there is a strong appeal for this structure of product.

What is clear is that most institutions are reviewing the economics of this product offering and are doing extensive consumer and product research to build a new set of needs based products that are driven by the transaction and money management behavior of their customer base. They are attempting to move towards a stronger set of value based products with enhanced features and benefits while eliminating fixed costs that are associated with low margin (inactive) accounts to improve portfolio profitability.

Has your organization decided whether to offer free checking going forward? Have you introduced new products with enhanced benefits for a fee? Have you considered changing your rewards program? I would be interested in your thoughts.

New Smart Card Geared to Convenience and Safety Conscious Consumers

As banks continue to innovate around the use and rewards structure of both debit and credit cards, the penetration of smart cards in the United States has lagged other countries. That may soon change, however, after Pittsburgh-based Dynamics, Inc. won the first prize ($1,000,000) 'DemoGod' award at this week's Demo tech start-up conference in Silicon Valley.

Leveraging a programmable magnetic stripe that can be changed at any time (but still able to be read at today's magnetic stripe POS readers) the MultiAccount card can carry different card accounts on one piece of razor thin plastic.

This could be a debit card and credit card, personal and business card, etc. Push a button on the card, and an integrated light source highlights the account being accessed. A card with a light source alone provides a WOW factor for the user.

For those users interested in an expanded level of security, another card (called Hidden) presented at the Demo conference by 31 year old Dynamics Chief Executive Jeff Mullen only shows an abbreviated account number on the card. To get a complete account number to appear, the user needs to type their PIN on a set of five buttons on the surface of the card. When the correct PIN is entered, the electronic stripe is then populated with the appropriate magnetic information so that it can be used in today's readers. In other words, the card is of no use to a thief unless they have the integrated PIN.

Both cards are thinner than traditional cards in the marketplace today, yet still have a small built in microprocessor with integrated memory which is powered by a battery with a three year life. Oh yeah, and the cards are both scratch resistant and waterproof, which Mullen displayed as part of his 5 minute presentation demonstrating the card at the Demo conference.

This new card technology is definitely coming at an opportune time, as bank marketers are looking for new ways improve engagement by stimulating the use of card products and the participation in rewards programs. With the Durbin Amendment set to impact interchange income for debit card transactions next year, bank marketers need to find ways to get top of wallet placement in the consumer's mind and through usage. The benefit of combining multiple card accounts on a single piece of plastic alone could have major financial benefits for banks. This type of product could also impact retention of relationships, further impacting the customer lifetime value.

As the planning process is well under way at many banks, an introduction of this type of product (which has been in a stealth test mode for an extended period in the marketplace by Dynamics) could provide the foundation for a new payments strategy. With behavioral segmentation already built into the product's benefit continuum, this could be the answer to many concerns of card product managers and bank marketers alike in 2011.

Update (October 5, 2010): It was announced yesterday that Citibank will be the first bank in the country to leverage the Dynamics, Inc. card programmable magnetic stripe, embedded battery and chip as well as integrated buttons on a payment vehicle in a well publicized pilot. The Citi 2G Credit Card will allow consumers to make a choice whether to pay for a purchase using a traditional credit account or to utilize points for the purchase.

“People don’t typically think of credit cards as an innovative product, but we are excited to be the first issuer to pilot these advanced technologies and additional choice at checkout through the ‘next generation’ of credit cards,” said Terry O’Neil, executive VP of Citi’s North America credit card division. “With Citi’s latest feature, customers now get a credit card that better fits their lifestyle and needs, putting more options right in their hands.”

At a cost of about three times the cost of traditional plastic cards, it will be interesting to see if other banks get on the bandwagon and develop innovative and segmented products based on this technology.

What's Next for Debit Rewards?

At a time when banks are trying to catch their breath from the reduced fee income impact of Reg E, the government has proposed a cap on interchange income that could equate to a 70%-80% reduction in fees that a bank can collect as part of debit card transactions. In travels across the country, it is clear one of the first casualties of these regulatory changes has been the reconfiguring or elimination of Free Checking at the largest banks.

Will these changes also eliminate debit card rewards programs that are funded by interchange fees?

Earlier this month, JPMorgan Chase Bank announced that they will be phasing out their debit rewards programs. It is clear in talking to bankers that almost all other financial organizations that offer rewards programs are also evaluating their options as we enter the new year. Even if the proposed limit of 12 cents a transaction is increased (as has been discussed over the past few weeks) banks will need to respond in a way that has the least impact on an increasingly disgruntled customer base, while still compensating for some of the lost funding.

Beyond changes to the checking account offerings already implemented or planned at most banks, potential changes to reward programs could include one or more of the following:

• Elimination of a reward program already in place: A difficult option given that many consumers enrolled and active in reward programs are the higher value relationships at a bank. Some banks are considering the elimination of rewards programs for only certain categories of accounts (i.e. Free Checking). 
• Assessment of an annual fee for reward-based debit cards: Some organizations already have an annual fee that is waived for the first year of enrollment.
• Reduction in the value of point/reward interrelationship: This is an option that impacts the most active and loyal rewards program participants the most.
• Introduction of a relationship-based reward program: Changing a points based reward structure to a program like Bank of America's 'Keep the Change'  provides additional flexibility since the foundation is around an expanded banking relationship.
• Introduction of a merchant-funded reward program: Shifting the cost of the rewards program to the same merchants who will benefit from the change in interchange regulations, hyperlocal rewards program companies like Bling Nation (that recently signed an agreement with PayPal), transaction history rewards company Cardlytics (that recently signed an agreement with ClairMail for immediate mobile reward notification) or one of several other merchant-funded programs may either replace or supplement current rewards offerings.

The last option above can actually be a revenue generator for banks since the merchant not only funds the reward, but usually pays the bank a marketing fee.

Any of the changes to reward programs discussed above will require significant customer communication to avoid a negative customer experience at a time when many household checking accounts may also be changing. It will be the role of bank marketers and product managers to try to retain the loyalty of some of the most valuable households who have enjoyed the benefits of these rewards.

At the same time, it will be important to heavily promote the use of debit and credit cards to help offset some of the impact of these regulations. The benefit is not only the increase of interchange income from increased transactions, but also improved retention achieved from the more engaged customer.

If you have a rewards program at your bank, I would love to know how you are planning to respond to this most recent challenge originating from a supposed consumer-focused regulation.

DDA Under Siege

As part of the planning committee for this year's BAI PaymentsConnect 2011, I would love to take credit for the great title of this program track, but I am not sure even the great minds at the BAI could have foreseen how apropos "DDA Under Siege" would be for bankers attending this year's conference that wraped up today in Phoenix.

If there was a unifying theme from the many sessions I participated in this week, it was that revenue lost from last year's Reg. E and this year's Durbin amendment can not be completely recaptured through repricing. Instead there needs to be a stronger focus on targeted customer acquisition, share of wallet growth strategies, retention, product innovation and cost containment. While everyone at the event seemed to be interested in what others were going to do around checking repricing, the energy was definitely focused on building a stronger platform for the future.

Sessions at the conference started with a review of the BAI/Finacle Innovation Imperative Customer Sentiment Study completed last Fall, which found that while there is still a ways to go in the customer's confidence in the economy and the banking industry in general, the view of bankers is more closely aligned with the consumer than in the past couple years. This uniformity of beliefs should assist as banks try to build messaging around their checking repricing and try to improve the customer experience. The study also found that the customer's perception of their bank being 'innovative' tends to correlate with satisfaction, product ownership and overall confidence in their bank.

Steve Mott from BetterBuyDesign followed the BAI research presentation with a very fast paced competitive overview of the payments industry, including a discussion around Google, PayPal and several potential payments platforms from the U.S. and even China. His message was that it will be up to the banks to leverage their customer relationships, distribution network and trust advantages to maintain some level of ownership of the consumer payments continuum. He emphasized, however, that the bank 'ownership' of payments is anything but guaranteed.

David Stewart, Senior Expert from McKinsey & Co. expanded on his recent BAI Banking Strategies article, emphasizing the continued importance of the debit card in the bank's payment product arsenal. In addition to providing financial metrics around the value of the debit customer and the real impact of repricing with net interest margin and other fees are included, he emphasized that trying to move mindshare or marketshare from debit to credit may be close to impossible in today's economic environment. David also shared the view of McKinsey that the potential for merchants to 'steer' payments from one payment vehicle or another was unlikely since doing so may actually cost the merchant more in discounts than could be retrieved in interchange savings.

David also left the attendees with the following strategies for trying to reposition the debit product in the future:

• Base debit strategy on new debit economics as opposed to the old economics
• Price products for competitive advantage
• Rationalize customers on the relationship level not just checking level
• Remember that the debit product is still sticky and builds customer engagement

Ending the morning sessions was a presentation by Hitachi Consulting around the findings of their semi-annual Consumer Payments Preference Study released last Fall. Some of the highlights included:

• The millennial generation provides a good opportunity for growing payment volume (especially around mobile)
• Ease of use and convenience drive payments behavior
• Debit is still the preferred payment method
• Credit for online purchases expected to increase
• Micropayments will continue to increase

Hitachi also emphasized that security continues to be a concern of consumers and is impacting the take up rate of mobile for payments.

The afternoon sessions revolved around ways that banks are trying to take back the payments franchise and extend relationships beyond just the DDA, with speakers from the Federal Reserve, Fiserv, Comerica, Fifth Third, Peak Performance Consulting, Novantas, TD Bank and Huntington Bank all providing unique viewpoints. It was clear during these sessions that the days of every bank having close to the same product set are over. While some of the larger banks may retain a Free Checking program (PNC's decision was referenced often during the conference), many are completely revamping their deposit product portfolios in a way that reinforces their brand and leverages their customer franchise. All of the banks were also bullish on credit products as well as the need to continue to capture increased share of wallet.

Hank Israel from Novantas stated that banks should segment their customers based on channel preference and will most likely price their product set in one of the following ways:

• Keeping Free Checking (hoping to make it up on volume)
• Fee for services (make it up within the checking product set)
• Product bundling (packaging product sets based on customer needs)
• Relationship pricing (drive value from relationship perspective)

A strong case was made for all banks to move more to a relationship focus that can optimize customer profitability and focus on customer needs.

Tuesday's sessions focused on how banks can go on offense through mobile banking, prepaid debit and mobile payments as well as how institutions can better defend their customer base through onboarding and rewards. Some of the key takeaways from the mobile banking session presented by FIS and M&I Bank included:

• Smart phones will be used by the majority of consumers by the end of 2012
• Mobile banking will surpass online banking by 2015
• Remote deposit capture is the 'power app' that engages the customer (more are needed)
• Mobile banking customers have a 53% lower attrition rate (Tower Group)
• Mobile banking customers decrease VRU use by 55%

The speaker from M&I Bank also emphasized the need for banks to build mobile banking critical mass quickly, with a focus on expanding the solution set coming after 'getting the basics done right'. He referenced that mobile banking customers at his bank had higher balances, increased check card usage, and a better bill pay adoption rate than similar customers without mobile banking.

Greg Schreacke from First Federal Savings Bank and Robert Gitner from Velocity Solutions discussed the market potential for prepaid debit and how a bank could build a checking product set around the card. Research was presented that showed the following characteristics of a prepaid debit user:

• 53% have a checking account
• 50%+ want a prepaid debit because of overdraft fees
• 47% want immediate access to funds
• 46% believe they can get better service at a retailer than a bank
• 43% have had a previous problem that limits their ability to open a traditional checking

In the mobile payment presentation done by Calvin Grimes from Fiserv and Emmett Higdon from Forrester Research, the impact that mobile banking has on the customer relationship was again emphasized. It was shown that not only is a customer who uses mobile banking 30% more likely to stay with a bank, but the customer is also 26% more likely to recommend their bank. The team emphasized that now was not the time for banks to stand on the mobile financial services sidelines, but instead should be searching for ways to move their mobile solutions from being simply informational to being more transactional.

While many banks are still trying to build the business case for mobile payments, the following benefits were shared:

• Customer acquisition and retention benefits
• Lower cost of servicing
• Revenue generation potential and revenue retention
• Competitive parity
• Better customer experience
• Deeper customer engagement

It was also mentioned that, while security and privacy concerns still remail around mobile payments, these concerns will eventually work in favor of traditional financial institutions since customers inherently trust banks more than companies like Google, Apple or even their phone company.

The presentation that I did in partnership with Bill Stamp from KeyBank focused on the market trends around onboarding as well as the basics on development and implementation of a successful onboarding program. Interestingly, when the attendees were informally polled as to their current onboarding programs, while the majority were doing something, less than half were using more than one communication channel, very few were leveraging three channels, and only one bank was communicating with their customers more than 5 times in the first 90 days. It was stressed that this lack of a focused and consistent onboarding process could hamper organization's objectives of improving customer engagement, increasing fee income and definitely hurt cross-sale and retention efforts.

Bill's presentation around KeyBank's onboarding program illustrated that developing and managing an onboarding initiative is an ongoing process where testing of offers, channels, and communication sequence and cadence is continuously needed. Bill also shared how an onboarding process can reinforce cross-selling done at the new account desk and the importance of reinforcing engagement with services before the cross-selling of other products.

To further reinforce the importance of engagement and retention in a highly competitive and revenue challenged marketplace, Tom Brooks from Regions Financial Corporation, Lynne Laube from Cardlytics, and Aaron McPherson from IDC Financial Insights showed how a highly innovative merchant-funded rewards program may be the answer for banks looking to move away from a 'reactive' interchange funded program to a 'proactive' program that could be bring higher value to the customer and even make money for a bank.

Lynne Laube discussed two macro trends in the banking industry that has paved the way for a merchant-funded program:

• Digitization of payments (where and how payments are made)
• How customers relate to banks (>50% have online banking with 7 visits a month to their online banking site)

The benefits of a program like Cardlytics offering shared by the panel included the ability to target actual transactions for incremental growth and engagement. The benefit to the customer is that offers will always be relevant, while the merchant benefits from only providing offers to people very likely to be interested in their services. Since the targeting potential is so strong, more valuable offers can be developed as opposed to when a merchant is discounting to the masses.

While the program at Regions is relatively new, the benefits included:

• No enrollment is required (all customers with online banking and electronic statements are included)
• Ease of value transfer (no coupons are needed since the customer can electronically 'activate' an offer and 'redeem' the offer simply by using their debit card)
• Immediate notification of earnings/rewards
• Rebates deposited directly into account
• Offers are targeted and relevant
• Integrated user experience
• Fully funded as opposed to being a contingent liability like with points programs

The success of this innovative rewards program was probably best illustrated when Lynne mentioned that Cardlytics is partnering with 2 of the top 5 banks already and expect their customer base to grow from 15M today to more than 60M by the end of the summer. For more information on Cardlytics, read my earlier blog on the company done last year.

Without a doubt, this was a well-timed conference covering a broad range of topics on the front burner of many banks. On each attendee 'to do' list upon leaving, I am sure there will be a review of any pricing changes not yet implemented, a strong focus on ways to engage and retain new and existing customers we can ill afford to lose, and a much more accelerated movement to future payment products like mobile and even P2P.

I would love to hear from other attendees about their experience and takeaways.

Differentiation Is Key Component To The Value of Rewards

Yesterday, it was announced that merchant-funded rewards leader, Cardlytics had signed a global strategic alliance with loyalty leader Groupe Aeroplan allowing for the expansion of transaction-driven marketing (TM) to Canada and abroad.

Unlike traditional rewards programs used by financial institutions that are points based and driven by the volume of transactions processed, the Cardlytics platform provides the ability to present highly targeted retailer offers to customers through a bank's online statement, mobile device or email based on the customer's recent transaction activity. Since the Cardlytics decisioning tool resides within the bank's firewalls, customer insight never leaves the bank and retailers never have access to proprietary customer information. In addition, as opposed to the points reward program being a cost to the bank, the Cardlytics pay-for-performance model not only eliminates risk for the merchant, but also can provide much needed revenues for the partner bank.

The Cardlytics solution has been so well received, that as many as 70% of U.S. households could have such a program tied to their bank's debit and/or credit card relationship by Q1 of 2012, according to Scott Grimes, Cardlytics' CEO. This amazing growth and acceptance begs the question . . . if all the banks have the same program, how can differentiation be achieved and maintained?

In an interview with Lynne Laube, President and COO of Cardlytics earlier this year, I asked her how banks can leverage the Cardlytics platform and retail partnerships beyond simply offering the same offers as the bank down the street. She explained that while most bank clients will have many of the same nationwide retail partners, there will the capability to offer significant regional or even local offers. While some of these merchant partnerships might be initiated by Cardlytics, individual financial institutions can also link retailers to the platform.

For industrious financial organizations, the ability to offer current or prospective corporate, commercial or small business clients with highly targeted audiences who are prone to buy their products could be a strong business development and retention strategy for calling officers. It also would differentiate the bank's reward program from others across the country. By expanding the program's merchant partnerships, the retail and small business customers will also receive more targeted offers, making the program more valuable to the customer.

Another way a bank can differentiate a merchant-based rewards program will be to expand the channel integration of the merchant offers. Beyond simply providing the targeted offer as part of online statementing, the individual bank's ability to seamlessly integrate the offers into email, SMS alerts and even mobile channels will increase customer engagement and loyalty. Leveraging GPS capabilities could enable customers to receive onsite rewards at merchants they frequent or merchants within a defined radius.

According to an eMarketer study released today, while mobile coupons still represent a small portion of digital promotions, popularity and usage is growing at a rapid pace. It is believed that mobile couponing may grow by as much as 80% over the next two years fueled by the growth of smartphone users. Banks' ability to take advantage of this mobile trend will be the foundation for future rewards program growth.

Potentially most powerful from a differentiation perspective, Laube mentioned that insights from ongoing transaction monitoring can provide valuable behavioral insights that can assist in customer and household segmentation and even financial product cross-selling. Banks could leverage merchant rewards as a 'virtual currency' for different segments of customers or could provide merchant offers as an incentive for consolidation of relationships. As banks begin to introduce more advanced PFM and other money management tools, this type of rewards platform can also be integrated into the customer dashboard.

In a world filled with offers from Groupon, Living Social and more than 600 other competitors, the marketplace for untargeted offers may be reaching a saturation point. According to research firm, Lab42, while 44 % of households use deal websites, 55% feel overwhelmed by the number of offers filling up their email box. Given this mixed landscape, the ability to provide highly targeted, timely and valuable offers will be the key to effective differentiation.

What do you think?: How else do you think banks could differentiate themselves using merchant-funded rewards?

Big Data Provides Big Opportunity for Bank Loyalty

In a new regulatory environment, banks are faced with changing the foundation of rewards programs that were previously funded by interchange income from credit and debit cards. With debit interchange funding gone, FIs still need to continue to find ways to improve bank loyalty and drive the desired card behavior. In addition, banks need to leverage “big data” and mobile payments in the hope that they can replace some of the revenue lost as a result of Reg E and the Durbin Amendment.

Optimally, the future of rewards and loyalty will allow banks and credit unions to take advantage of the “Loyalty Trifecta” (my term for bringing together the benefits of 1) payment and transactional insight, 2) targeted offers and personalized communication as well as 3) mobile offers and payments).

To get an insider view of the challenges and opportunities available to banks today in the area of rewards and loyalty, I reached out to the leaders of four companies that provide unique solutions to the banking industry and who also will be co-panelists with me at the upcoming BAI Payments Connect 2012 Conference & Expo in a session entitled “Rewards in a Mobile Banking Environment.” 

Thanks to Tom Beecher, CEO, Cartera Commerce Inc.; Rob Heiser, President and CEO, Segmint; Schwark Satyavolu, CEO, Truaxis; and Rod Witmond, senior vice president, Product Management & Marketing, Cardlytics Inc who agreed to participate in the panel and contribute to this interview.

Note: An abridged version of this interview is also located as a BAI Banking Strategies article entitled, Big Data Drives 'Loyalty Trifecta' for Banks.

Q: What’s the current status of the banking rewards environment today and how can it be improved upon?

Witmond: Previously, U.S. banks brought offers to customers in a separate section of the bank website – often referred to as an “online mall.” Only a small percentage of their customers went there. It was not a loyalty solution. Various bank rewards solutions required the customer to enroll their card at a separate site and then hope they remembered to shop at a group of merchants providing lackluster discounts. Low engagement or difficult-to-use approaches won’t strengthen a retailer’s relationship with customers or move the needle on sales – for the merchant or the bank.

The banks’ business cases for the early generation, merchant-funded rewards programs promised significant earnings to the banks driven by large revenue shares. For the reasons stated above, retailers did not see these solutions as adding value to their current marketing mix and budgets did not shift. U.S. banks ended up with a big piece of a very small pie. New enhancements from loyalty vendors have refined the early approaches on several fronts.

Beecher: The scope and strategies for banking rewards have changed dramatically in the past two years. Durbin has forced banks to re-imagine how loyalty programs are designed and funded. Also, the development of card-linked offers – where consumers earn cashback or points when using their bank’s payment card at participating merchants – has opened up new incremental revenue opportunities for banks. Finally, the growth of Groupon and deals in general has made consumers (and banks) much more aware of the power and importance of local merchants and online offers.

Satyavolu: Most banking rewards in the past had four defining aspects: 1) they were mostly available on credit cards and less frequently on debit cards (due to being funded by interchange from merchants); 2) they were mostly one-size-fits-all (everybody gets the same extra points/cash-back on certain categories whether or not you shop there); 3) they were typically limited to cash-back or points back benefits; and 4) merchants were not involved in the creation of these benefits.

Heiser: The way FIs interact, engage and communicate is driven more and more by their customers’ technological lifestyles. While merchant-funded reward programs were one of the first to react to this shift, success today involves the application and technology adoption that is driven by transaction intellect − knowing and understanding the needs of customers.

Q: What are the benefits of your solution (from both a bank and consumer perspective) compared to rewards programs used by banks in the past?

Whitmond: While most rewards programs in the past used a points currency to reward based on the number and/or level of transactions, we now can leverage all of the banks electronic transaction data to isolate customers into finely defined segments. By leveraging purchase transaction data, we enable retailers to invest aggressively to grow their business. Bank customers receive 20% when they shop at new retailer, not 1%. And since the customer is receiving these rewards as part of their online banking experience (where the customer is viewing their relationship 9 times per month and 25% view their relationship daily), retailers realize that customers interact with their offers over a 100 times more than with other digital channels!

Beecher: Instead of the bank funding the rewards program as in the past, merchants pay for the card-linked offers and also pay a commission on the sale which turns into revenue for the bank. Therefore, the bank gains a new incremental revenue stream, and increases customer engagement and card spend. Because Cartera runs these programs as a fully managed, pay-for-performance service, banks can launch and innovate quickly and at low cost. In addition, instead of the customer needing to visit a rewards site to select their gift, redeeming card-linked offers is as simple as swiping their payment card at the participating merchant. The reward is automatically added to the customer's account in the currency set by the bank.

Satyavolu: Due to the advanced analysis of robust transaction data (within the bank's firewalls), the merchant is willing to provide much richer rewards to the customer than they could in a normal online coupon based environment. They already know the customer is 'qualified', therefore a greater incentive can be offered. In addition, while there are national merchants involved in the program, the bank can include local merchants as well which can build a strong bond with a bank's small business and commercial customers. Finally, unlike previous rewards programs that are simply based on transaction levels, today's rewards are much more personalized with the selection of offers being improved as the customer engages in the program. This drives a higher degree of online and mobile engagement with 35% higher login rates.

Heiser: As opposed to being a program based on rewards, Segmint leverages digital marketing technologies to help FIs acquire, cross sell and retain bank customers through dialogue marketing. Our program is driven through the micro-targeting of bank customers and assigning of Key Lifestyle Indicators (KLIs) - unique identifiers based on individual spending patterns and lifestyle trends. If customer engagement is the primary goal, then FIs ability to use KLIs to understand bank customer life events and deliver a comprehensive set of relevant FI products and services is ultimately a win-win for both sides. With today’s savvy consumer expecting to receive highly-targeted and engaging information, this meets their growing demand for personalized service and simplicity.

Q: How can a bank 'customize' your solution to differentiate itself in the marketplace?

Whitmond: Banks have numerous ways in the user interface to design a solution that is completely integrated to their specifications. This not only differentiates our solution from others in the market, but also from other banks that may have installed our solution. Second, because the Cardlytics solution is software loaded onto hardware that is in the bank’s environment, the bank has complete control over the targeting solution. This also means the bank has complete access to any - and all - relevant data fields. As such, the bank has complete control over designing and deploying solutions around the rewards program. This has resulted in customized email, SMS, mobile and social solutions.

Beecher: Cartera programs are private-labeled and customizable for each of our bank partners. Each bank can control the program construct and currency (e.g., cashback, points) , marketing strategy and messaging, merchants and offers to include, consumer experience, and marketing channels to use. Cartera supports the full range of options with technology and services and allows each bank to launch and run a distinct, differentiated program.

Satyavolu: StatementRewards provides each FI access to a web-based dashboard where they can control the nature and quantity of offers their customers will receive. Some of the unique features of our solution include merchant-level purchase insights, geo-aware services, cross-sell capabilities, social networking distribution (customers can share rewards on Facebook and Twitter and brag about their loyalty status level as they shop), gamification (reward discovery incentives), and bill analysis (allowing customers to receive personalized, recommendations to help save money on monthly recurring expenses like wireless, TV service and gas).

Heiser: Data-driven CMOs can utilize Segmint’s analytics engine, instantly-actionable campaign management tool, and ad delivery platform for the micro-targeting of bank customers and to initiate and manage customized experiences. Whether a mix of FI products/services or bank partner offers/discounts, Segmint's solution helps FIs initiate interaction and generate real-time offers when it is the right time for the bank customer. Segmint’s solution also provides unparalleled speed-to-market and comprehensive metrics – ultimately resulting in optimization of marketing spend. 

Q: How can your own solution be leveraged in a mobile environment as opposed to an online banking or bricks and mortar environment?

Witmond: The Cardlytics solution is already leveraged in a mobile environment. We have bank solutions for SMS, mobile, and email in the marketplace. Additionally, we have ATM and social media solutions close to deployment. Most banks start with online banking because it provides the greatest exposure to the rewards platform. However, they quickly recognize the value of extending into mobile applications where they have complete control over the data and data fields. As such, they can drive mobile solutions at their own speed. Where a bank cannot deploy a mobile solution quickly, we offer a white-label mobile solution that can be deployed alongside or within an existing FI application.

Beecher: Mobile is an increasingly important channel for communicating with consumers -- particularly with the growth of in-store (national and local) offers. Cartera powers mobile apps that show consumers where they can use their payment card to redeem card-linked offers from nearby merchants. As Cartera partners roll out support for mobile wallets, this capability will become even more powerful by enabling consumers to find and redeem offers entirely via their smartphone.

Satyavolu: Truaxis’s StatementRewards product easily integrates with a FI’s existing mobile banking app to provide additional benefits to banking customers. Through the existing mobile app, bank customers will be able to view all of their rewards, both purchased and available, via the user dashboard. From this user dashboard, customers can instantly view, purchase and redeem rewards directly while they’re on the go.

Heiser: Segmint is not a merchant-funded rewards provider and, as such, our philosophy is grounded on generating loyalty through digital engagement with customers. Segmint is device-agnostic and can deliver across virtually any electronic medium. There is no doubt that opportunities exist within the mobile environment, but as with all mediums/channels, success revolves around the actual content delivery.

Q: What innovation do you see on the horizon around loyalty and reward platforms, both in banking and non-banking industries, in terms of leveraging social media?

Witmond: We have banks that have already designed how our solution can extend into social media and are deploying the same. The challenge with social media is that it is a “social experience” all about engaging on a person-to-person basis. That being the case, the extension of the core platform into social is only the first stage and the true challenge is in making the rewards solution one that engages on a person-to-person basis.

Beecher: Innovations in payments, big-data-driven marketing, and loyalty are all merging together to form what will ultimately be a new playbook for companies in these spaces and a new set of winners, including the new card-linked offers space. Mobile payments are seeing new non-banking entrants, all realizing that the incorporation of offers into the wallet is central to consumer adoption.

One of the new frontiers of leveraging big data with marketing is anonymous payment data, where new technologies and entrants are helping banks use transaction data that preserves privacy and provides real benefits to consumers. An example would be my purchase at McDonald’s alerting Burger King to make an offer to me. The entire funding model for bank loyalty programs is being turned on its head with merchants paying consumers through banks to shop with them rather than banks focused on taking money from merchants (through interchange) and then funding rewards themselves.

Satyavolu: The biggest innovation for these platforms will be the continued use of data to drive personalization and cut-costs. Both banking and non-banking industries are sitting on piles of data that they both don’t have the resources to utilize and if they did, they wouldn’t know where to begin. By working with third-party vendors like Truaxis, these companies will finally be able to utilize this data through innovative new techniques.

Analyzing transaction data from FIs is only the tip of the iceberg. As these platforms become more integrated across multiple channels and industries, companies will be able to understand and connect with their customers to provide them with the most value and ensure that each customer has a completely personalized experience that provides them with exactly what they need and want.

The data buried in social networks adds an interesting new twist to the personalization capabilities that are made possible, when you add them to the transaction data streams that FIs already have today. The concept of loyalty marketing will undergo a quantum shift in how it operates and who is in the key enabler seat for merchants, where FIs have a huge opportunity and upside to facilitate these interactions.

Heiser: Social media is a huge game changer for FIs and will become the “biggest bank branch” they operate. With nearly a billion active monthly users on Facebook, FIs must become socially actionable and interact with customers in their channel of choice. Last year Segmint introduced SegmintSocial, our social media technology solution that gives FIs the power to precisely identify their customers on the bank’s Facebook page, customize their experience and engage them in real-time, personalized dialogue.

EMBARKING ON A NEW ERA FOR BANK LOYALTY

We are obviously entering a new era for bank loyalty and reward programs, where banks can leverage transactional and payment data to build a personalized engagement process. Whether the program includes merchant-funded offers or simply uses customer insight to drive greater share of wallet and retention, banks can significantly improve the value of the relationship from both the customer and bank's perspective.

Since we are treading on new territory regarding the use of customer insight, there may be consumer push-back at first as they see rewards/ads integrated on their online banking statement, ATM screen or even their phone. There will be tests of geo-locational marketing with many of these reward program in the near future, where customers may receive their offers via an email or SMS message as they near a participating merchant. 

The potential payoff for this new level of engagement is significant, however. According to recent Aite Group research entitled, The Case for Merchant Funded Incentives: New Opportunities for Card Issuers, merchant funded incentives could drive US$1.7 billion in annual revenue for card issuers by 2015. In addition, the number of U.S. cardholders (credit, debit, and prepaid) who subscribe to merchant- funded incentive programs could exceed 460 million by 2015.

“Merchant funded incentives programs are a good deal for card issuers, and offer a new revenue stream,” says Madeline K. Aufseeser, senior analyst with Aite Group and author of the report. “Because the cost to operate merchant-funded incentives is less than that of traditional reward programs and will generate a greater profit per account, card issuers will most likely consider swapping some existing traditional reward programs for merchant funded incentives programs, especially on debit portfolios.”

It is definitely a time of change for loyalty, and a time when marketers will be armed with significantly more customer insight to build marketing programs. Rewards and loyalty programs only scratch the surface of opportunity available to savvy bank marketers who can make use of 'big data'.

Is your organization considering or already implementing a new rewards and/loyalty program? How will you engage your customers to participate? Will you 'localize' your program, including local merchants? Will you leverage social media to enhance your customer profiles or help market your program. I would love to hear from you.