Head of Marketing
Card-Linked Marketing (CLM) is a hot topic nowadays for many industries, yet it has not been explored significantly by the financial firms. This article explains the basics behind CLM, its status in the financial services industry and how it can be enhanced with a banking API technology.
Card-Linked Marketing looks to be the pinnacle of the banking sector fully developing the digital media required to cater to their retail clients. It is often defined as a digital media channel, for the use of retail establishments to gain access to the data of the bank’s customers, in order to feed them targeted and highly specific advertising. This advertising is revolutionary because it is far more than just targeted but exact to the users past and future needs. It is seen as an asset for the consumer, rather than a bother.
To really understand the power of card-linked marketing, it’s worth using several examples. Consider a bank’s retail client who often enjoys eating at several sushi restaurants in the city. This is evidenced by the transactions that the bank has a record of in their account, as well as the frequency of those transactions, compared to others in the account. If one of those sushi restaurants would like to outpace the others, they can use CLM to reach out specifically to this user and cater to their exact desire with coupons, promos, and exclusive seating. They can make a powerful impact on a restaurant aficionado who is already a customer but extend that relationship long-term. For the restaurant, this can mean larger bills and longer drink times at the bar, which can result in higher revenue.
The beauty is all of this marketing is done anonymously and securely and is based only on the consumer spending. No personal information is divulged. The greatest draw though is that the customer has tailored advertising. It’s essential what Google’s advertising platform has utilized successfully for years in leveraging users search history to provide them with advertisements that are helpful and encouraging, leading to more sales. The difference here is that this is a whole new media, exclusive of surfing the web or using apps. It’s an intimate advertising opportunity that is worth embracing.
The precursor to card-linked marketing really rests on the rewards cards pioneered in large part by Visa and Mastercard in The United States. These cards have paired individuals passions and interests with bonuses and kickback rewards for increased shopping or shopping through a given merchant or medium. As the above evidence indicates, a much better job can be done.
For all of the hype surrounding credit linked marketing, more than half of financial institutions in North America and Europe have not implemented the strategy. This stems from two main concerns.
First, many potential advertisers are just not aware of this growing technology. With that comes a fear of how it is integrated and how customers would receive the new media. There is an incorrect perception that privacy concerns will be breached. Second, more than two-thirds of advertisers are still stuck in the old fashioned methods of print and untargeted mass media advertising. Marketing departments need to be encouraged of the possibilities in using the most highly targeted method of advertising and presenting it in a way that is truly beneficial to the end user. Once they experience it first hand it is difficult to argue the effectiveness.
Second, big banks are worrisome of implementing this unheard of digital media to their legacy IT department and systems. Many of their systems were introduced long before this technology became a viable option. Updating now, many would fear is a complicated and multi-year process.
API stands for application program interface and it interacts with banking as a set of uniform protocols and tools for building interactive software applications. Most importantly, in the financial sector, banking API allows for non-tech savvy persons to develop applications and software. Financial stalwarts can utilize this ability to construct applications directly for the needs of their personal retail clients. Thus, card-linked marketing can occur in the house.
API in banking is all about streamlining use and success across the board. Remember APIs do not work to change anything in the software. They simply allow independent parties to work with the software and make additions and subtractions on an individual level. Though neither of those changes affects the software as a whole, just that given experience.
The implications for Banking API and CLM in concert are immense. Current trends tend to suggest the developed world is moving closer to making that a reality. Though opposition remains, influencing parties are beginning to move in the right direction.
At the forefront of implementation are government entities. In 2015, the UK the treasury spokesperson wrote favorably of an open API standard that could be utilized by all UK banks. The initiative would enable fintech startups to use the API to tailor their products and services to the established banking sector. Although the treasury spokesperson is focusing on the benefit to the UK financial sector this will entail, the reality is that the push would make for more improved card-linked marketing.
This is important because card-linked marketing has been highly successful in The United States at filling up seats in restaurants, crowding concert venues, and selling large amounts of merchandise. In the United Kingdom and Europe, we have a vastly different story. Access to the transaction data required to implement these linked offers has been largely denied.
The merchant also holds fears that they will be left out, due to the technology hurdle, which is largely unmitigated. Not only that but they are intimidated by the number of parties involved including affiliate networks, cardholders, financial institutions, and the growing number of fintech startups building the APIs to make all of this work.
With everyone fighting over privacy concerns and who really owns the data the small fintech companies producing the APIs are largely working with the general message that no one owns it. As controversial as that sounds, the opening up of the data to the wide spectrum of parties involved will enable these fintechs to use their APIs to the fullest in a streamlined manner. This takes pressure off the merchant, saves the financial institution money, creates business for the fintech, and leaves the consumer satisfied with the targeted advertising and rewards they are receiving.
Finally, some API producing fintechs are starting to work with whatever small data sets they can get their hands on and focus directly with a customer base that is enabled to choose which merchants are allowed to communicate directly with them in their purchase and incentivise them on an individual basis. This data is aggregated by the API which can then use it through each individual. The system works as easily as integration as an app in a smartphone.
For many retail bank customers, monthly statements and credit card bills often vaguely remind the consumer of what they spent and how. The statement might read: “fast food restaurant” along with the postal code and an approximate date and time. This can be confusing and even after closer examination difficult to interpret. Now imagine how that data looks for the credit card company or financial institution. Banking API builders are looking for a brighter future in which that data can be assembled more logically and accessible to a variety of parties so that ultimately everyone wins.
The core of API development is that it creates a more smooth and reliable software interaction. The developers, in this case, the fintech startups can focus on specific code that makes their product or service improve the experience of their customer. The simple process saves a lot of time and money for everyone in the chain.
As a result, continue to look for increased pressure from financial institutions and consumers in Europe and the United Kingdom for better access to data through banking API. As governments continue to warm up to the idea of enabling the free flow of data the market as a whole stands to benefit and specifically fintech innovation will flourish.