Merchant Rewards and Cards

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12 March 2012
Zilvinas Bareisis
Last week American Express announced that it would be offering its cardholders the ability to sync their plastic cards to Twitter. When the customers tweet using special offer hashtags, couponless savings are loaded directly to their cards. This seems to be the latest in a number of developments by established players as well as new companies, all aimed at making it easier for merchants to offer relevant discounts or gifts to consumers by linking them directly to their existing payment instruments, most often cards. This clearly has benefits to the merchants who are able to better target their marketing spend. It also benefits the financial institutions which are able to offer their cardholders tangible rewards without significant expenditure on their part. In fact, sometimes, they even see the direct revenue benefit from participating in such arrangements. And the evidence to-date seems to indicate that consumers like it as well. Is this the way forward for card rewards? Will these merchant-funded rewards replace cash back, "miles" and other more traditional card loyalty schemes? How should banks think about these programmes? Which partners should they be working with? There are a number of companies in this space, from established players such as FIS and First Data, to relative newcomers, such as Cardlytics, Cartera, FreeMonee, BillShrink, Offermatic, Linkable Networks (formerly Clovr) and others. However, even though they appear to be offering similar services, they often have subtle, but important differences in their value proposition to at least one of the key parties (merchant, bank, and consumer.) And we suspect that they differ in their customer reach as well as technical or servicing capabilities. Merchant-funded rewards will be on the research agenda for Celent in the next few months. We intend to conduct a detailed review of the key players in this space. If your company is offering relevant services and would like to be reviewed in our research report, please don't hesitate to contact me at zbareisis@celent.com.

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