Transactional marketing: a way to inject profit into the online banking service?

• Position: MARKETING NEWS

WITH THE GROWING CONSUMER ACCEPTANCE of online banking, financial institutions now have an opportunity to introduce "transactional" marketing that offers online rewards and help convert online banking into a profit center, says Scott Grimes, CEO of Cardlytics, Atlanta.

Transactional marketing is a new type of loyalty incentive program that rewards debit, credit or prepaid card spending with offers that are based on an individual customers' actual spending and presented in a customer's online banking account, Grimes explains.

Over the past decade, the amount of stored customer transaction data has increased as many consumers have shifted the majority of their day-to-day purchases to debit instead of cash or credit.

"Transaction-based rewards are significantly more valuable than traditional card based rewards because consumer response to the highly relevant offers is so strong," Grimes says. Traditional online marketing targets based on information like demographics, which is meant to predict a customer interest. "Transaction-based marketing is not a guess," says Grimes. Offers are presented based on a customers1 actual spending: including the location, date, amount and merchant associated with every purchase. Transaction-based offers bring the relevancy needed to appropriately market in the banking channel.

Financial institutions have appropriately avoided loyalty programs that rely on others to protect the security and privacy of account information. The capability now exists to enable banks to act as matchmakers, pairing relevant merchant offers with appropriate customers. This occurs without customer data ever leaving the institution. Offers are securely paired with appropriate customers and presented alongside transaction records they review when they visit their online bank account.

To redeem rewards, customers activate the offers by simply "clicking" them within their online banking pages, thereby "attaching" those offers to their cards. The offers are automatically redeemed when the customers use their cards to purchase according to the offer's conditions. Such functionality does not burden customers with having to print coupons or enter promotion codes. The incentive provided by the merchant is not given at the point of sale. Instead, it is provided to the customer through the bank's rewards program.

An example of financial institution that is using transactional marketing is First Federal Savings & Loan Assn (assets: $3.4 billion)...