Cardlytics Looks to Mobile to Expand Reach of Card-Linked Rewards

Companies are starting to bet that consumer interest in electronically delivered offers and rewards is spilling into the mobile channel. In the most recent example of this trend, Cardlytics, an Atlanta-based firm whose technology lets consumers redeem rewards by using a bank-issued payment card, this week announced a tie-in with ClairMail Inc., a mobile-banking provider. ClairMail is “in the early stages” of working with two client banks on deploying the Cardlytics solution, says Reetika Grewal, director of partners and solutions at ClairMail

Two-year-old Cardlytics is hoping the new arrangement with San Rafael, Calif-based ClairMail will help it reach consumers it wouldn’t attract through online banking. “We know there are sectors of society that don’t online bank but do mobile bank,” says Rod Witmond, senior vice president of product management and marketing at Cardlytics. Meanwhile, banks may find Cardlytics’ software helps attract new mobile users who are more attracted to rewards than to balance inquiries. “There’s a subset of people who are just interested in getting offers,” says Grewal.

The extension to consumers’ handsets may also help banks earn more revenue on mobile banking at a time when the technology is still in its infancy at most institutions. Merchants fund all offers and pay a fee for each redemption, which is split between Cardlytics and its client bank. Witmond refuses to disclose the fee or how it is divided. ClairMail’s Grewal says banks also are starting to look for ways to hike the frequency of transactions on payment cards as a way of compensating for expected lower transaction revenues. Recent regulations have restricted banks’ ability to earn overdraft fees on debot cards, for example, and as soon as this month the Federal Reserve could release rules, mandated by the recently enacted Dodd-Frank Act, that will curb debit card interchange income.

Through the arrangement announced this week, customers of ClairMail client banks will be able to redeem offers they receive on their handsets by using a card issued by their bank. Cardlytics’ technology tracks customers’ spending and delivers merchant offers that are matched to demographics the merchant is trying to reach or linked to specific transactions users have made. A McDonald’s offer, for example, might be delivered to a customer who recently used his debit card at Burger King. While Cardlytics’ servers send the offers, the matching algorithm resides behind the client bank’s firewall, and no personally identifiable information leaves the bank, Witmond says.

Using ClairMail’s technology, offers will be delivered via text messaging, via a mobile app, or through the mobile Web. Users can accept the offer by pressing a specified button on their phone. They automatically receive the reward the next time they use their card at the sponsor merchant, with payments made directly into their checking account. The key is the capacity to send offers to consumers while they are out and about. The ability to reach consumers on their handsets, says Grewal, “puts Cardlytics on steroids.”

Cardlytics has signed “hundreds” of merchants, Witmond says, including fast-food giant McDonald’s and office-supply chain Staples. It is using a direct sales force to call on the nation’s 200 largest retailers. Before the ClairMail announcement, the company had signed a number of financial institutions, including Regions Bank, First National Bank of Omaha, prepaid provider FSV, and AccountNow. It is also working with an unnamed processor to deploy its technology with scores of other banks, Witmond says.

Cardlytics’ technology and strategy are based on the experience of Scott Grimes, the executive who was largely responsible for a decoupled debit card program at Capital One Financial Corp. that attracted much interest when it launched in 2007. It proved short-lived, however, as Capital One shelved the program when Grimes left to start Cardlytics. With decoupled debit, a bank can issue a debit card to any interested consumer, not just those who hold a checking account at the bank. Transactions are cleared through the automated clearing house network.