June 15th, 2011
Bank statements now come with targeted ads
The New York Times
Bank statements give customers monthly tallies on what they have saved and what they have spent. Now those same statements may give suggestions on where customers should spend their money, too.
The retailers suggested by the in-statement coupons send a small cut of the transaction back to BillShrink and the bank.
A company called BillShrink has worked with more than 2,000 banks to offer a new service — part loyalty card, part daily deal — called Statement Rewards. Under the program, online bank statements may include deals and discounts for bank customers based on their recent spending.
If, for example, a customer spent more than $100 at Starbucks in a month, Starbucks could offer a $5 coupon, complete with a small corporate logo, right under the statement’s listing for the last Starbucks purchase.
The same deals could appear on a smartphone so a customer walking near a Starbucks could see how close they were geographically — and financially — to getting a discount at the nearest store.
In the process, marketers gain access to preferred customers, while the banks and BillShrink get a small piece of each transaction. And the consumer now receives a bank statement, which most people regard as confidential and private, that is loaded with advertising.
The service comes at a time when marketers are increasingly moving to offer daily deals and loyalty programs to their customers and banks are reeling from legislation that has curbed fees they charge to consumers and retailers.
“The banking world is in a very tumultuous situation,” said Schwark Satyavolu, the co-founder and chief executive of BillShrink. “They need to do things that are consumer friendly, where the consumer actually gains when they make some revenue.”
BillShrink worked with Jack Henry & Associates on the service, which will be introduced this week. In addition to the geo-location technology that allows deals to be sent to smartphone applications, marketers can also track customers’ purchases and set silver, gold and platinum reward levels that give bonuses for each level. They can also dangle future rewards in front of customers in exchange for a few more purchases at a retailer.
Customers will be able to use their debit cards to redeem their rewards, eliminating the need to carry multiple loyalty cards. “Your debit card or credit card becomes the master loyalty card,” Mr. Satyavolu said.
Despite the obvious marketing angle, the service may also help consumers think more favorably about the banks they do business with, said Deborah Wood, the general manager of marketing and industry research for Jack Henry & Associates. “The consumer probably hasn’t looked at the bank as a way to save money,” Ms. Wood said.
The bank deals may appear intrusive to some users who are wary of aggressive marketing techniques, but users will be able to opt out of the service. Jack Gillis, the director of public affairs at the Consumer Federation of America, said the deals were indicative of a larger trend — the prevalence of advertising in our lives.
“Is there an advertising-free space we can live in?” Mr. Gillis asked. But given the ubiquitous nature of advertising, consumers have become increasingly accustomed to highly tailored ads. “If in fact you are purchasing things from a retail establishment, you are probably going to appreciate a discount,” Mr. Gillis said.
Daniel J. Kim, the founder and chief concept officer for Red Mango, a frozen yogurt company, said the company was considering using the Statement Rewards platform precisely because it allowed the company to offer deals based on how much customers spend and where they are located. “I think there’s a tremendous opportunity for personalization,” Mr. Kim said. “Before social media we just didn’t have access to this type of consumer.”
Jack Henry’s network of banks reaches nearly seven million customers in the United States and the range of banks included in the initial stage hold $7 million to $30 billion in assets. The average bank in the BillShrink program holds $500 million to $1 billion.
Bank customers are not the only ones who will see rewards. Banks themselves can forge partnerships with local small businesses that want to reward their customers. So instead of a reward for Starbucks on a user’s bank statement, a discount at a local coffee shop will appear, Ms. Wood said. “Hopefully this drives more traffic to the small business, and in doing so the small business sees the financial institution as a partner and not a vendor,” she said.
For banks, the rewards system is also a way to earn revenue, especially in the wake of banking regulations that went into effect last year restricting when and how credit card companies could impose interest rate changes and overdraft fees.
“Every bank out there is competing for the same customer today,” Ms. Wood said. “The tighter the relationship, the more opportunity the banks have to cross-sell.”
The rise in mostly free, online-only banking services like ING Direct and SmartyPig, which often provide Web customers with competitive interest rates, is also cutting into the competition for bank customers. Banks using BillShrink are catering to customers ages 20 to 40 who are accustomed to using their mobile devices and other online banking tools to manage their finances.
“The use of technology for those folks is as natural as waking up in the morning,” said Bryna Butler, the vice president for marketing and electronic strategy for Ohio Valley Bank, one of the banks participating in the introduction. “Their biggest worry is whether they can open their checking account online at midnight on a Saturday.”
Ohio Valley Bank has been testing the feature with a small group of users and offers from retailers like Wal-Mart, Kmart, Lowe’s and Borders. Ms. Butler said the bank had been looking to offer clients daily deals using services like Groupon and Living Social, but “the cost was prohibitive and there wasn’t a way to make that an effective endeavor for both the bank and the merchant.”
The Statement Rewards program solved that problem for the bank since it offers more personal rewards than a mass e-mail and there is no fee for banks to use the new service.
A $50 Wal-Mart discount card offered at $40 has been one of the more popular offers during the test. Customers “like being able to have those coupons at their fingertips,” Ms. Butler said.