In regard to the ‘Couponing’ or ‘Reward Trifecta’ I absolutely agree that geo-location/proximity will be the absolute killer app as this model progresses. Banks must not only support these type of efforts for card revenue from interchange, but the gain in insight on how (and perhaps why) customers choose to purchase a certain way becomes invaluable to present contextual value through rewards, bank products, or ancillary partnered offers. It will all come down to initial successes, from Cardlytics, Segmint, and other partners. Look at bill.com model as well, in essence rewards through bill pay and online statement.

I look forward to hearing more about your panel discussion, and in talking some more myself about the merchant side of the equation at the Backbase webinar I’m on on 3/7: http://www.backbase.com/webinars/07032012/

Thanks again Jim. Look forward to seeing this space grow.

As you point out, the power of the Cardlytics model (or that of Carterra Commerce, Truaxis, Segmint, etc.) comes from ‘big data’. The ability to leverage the payment behavior of each customer of the bank within the bank’s firewalls is tremendous. Not only can the bank determine where the customer shops (with a card) but also what they spend, how many times they visit, etc. The possibility of customizing offers is endless. Because of this customization, merchants will provide better offers than available through any other channel (Groupon, etc.).

The challenge, however, is in how robust the models become, how many merchants participate (not just big box national stores), and most importantly, how committed the bank is to build a personalized loyalty program (more than rewards). If the bank believes in the merchant-funded reward program (or loyalty program in the case of Segmint), they will need to bring local merchants to the table. This provides a tremendous opportunity for small business and commercial business development since the bank can help their clients sell their products using the reward/loyalty modeling capability.

In addition, there needs to be the eventual integration of social media insights like Segmint has built into their solution. The power of purchase data combined with social media insights enhances the customer experience and would provide a greater value to the merchant. Finally, the final piece of the ‘Couponing Trifecta’ is the addition of geolocation. To be able to offer a customer a highly personalized offer when they are near the merchant using the mobile payments capabilities of a bank makes merchant funded rewards and big data loyalty programs a big win for all parties.

Banks must commit to this model, however, for it to be successful. It will not run on it’s own or have the ability to be customized unless the bank (as opposed to the vendor) takes the lead. When a bank starts to approach 30%+ penetration (and use), the bank will have the combination of value and engagement needed for a strong loyalty model. They will also be generating meaningful revenue at a time when banks are looking under every rock for non-fee opportunities.