Cardlytics Targeting Transactions For The Financial Institution Says CEO Grimes

Scott Grimes is CEO of Cardlytics, a transaction marketing technology company. How is your Capital One experience coming in handy as you look to grow Cardlytics?

SG: Capital One provided a fantastic example of the power of the data in the financial services industry. We are enabling the financial institutions to leverage its data to the benefit of the Financial Institution (FI), their customers and the merchants.

What problem is Cardlytics solving?  -for merchants, banks and consumers.

Cardlytics is enabling Financial Institutions (FIs) to monetize the value of their transaction data in a way that benefits their customers and the merchants – while completely protecting consumer privacy and not requiring the FI’s transaction data to leave their premises. Merchants get access to a huge base of consumers (we currently reach 16M households and will reach 75M households by Q1 2012) who receive rich, relevant rewards that are extremely simple to engage with and redeem using the payment solution they use every day.

Can you provide a quick use case on how this works?

A consumer will see an offer appear in the digital bank account (online or mobile) – directly beneath a relevant transaction in the transaction history. They click the offer to view it, make it active and ‘load it’ onto their card. All they have to do next is spend at the store using their card, meet the requirements of the offer, and the reward is earned. The reward is aggregated with other rewards earned in the month and posted to their account as a credit at the end of the following month.

What is the competitive set and how do you differentiate? Aren’t you competitive to existing reward systems from banks?

Cardlytics’ target is the billions of dollars spent on other marketing channels (direct mail, print, radio, TV etc.) which have much weaker performance and are far from precise in their measurement.

Our architecture enables significant differentiation between ours and other marketing channels as well as others who are starting to provide similar solutions.  Our architecture (around which we have numerous patents pending) allows us two core benefits:

  • We completely protect and respect the banks’ transactional data and the consumer’s personal data.
  • We are able to ask detailed questions about the performance of the offers and conduct in-depth analysis around lift in consumer spend, the long term value of a customer, increase in share category spend for a merchant, and the overall ROI of the campaign.

With these two items above, we provide merchants with absolute proof of performance and a depth of analytical understanding they don’t get anywhere else; and we provide the FIs with a way to extend a rich, relevant rewards program that their customers love at no cost to the FIs – in fact we share a portion of the revenue with the FIs.

The rewards programs are seen as complementary to current rewards programs. We have implementations where our program was offered alongside the existing program and other implementations where our program was integrated into the existing program.

How do you overcome financial institutions skittishness about inserting offers into private financial data?

We enable the FIs to maintain complete control over the targeting solution such that transaction data never has to leave their secure facilities. Everything happens behind the FIs firewall and there is no personally-identifiable data in the system whatsoever: no demographics, no user names or passwords, no card data.

Looking from the retailers perspective, how does the targeting work? How exact you can get?

We can target extremely precisely. We can target based on transaction information including: zip code, store name (eg. a specific fast food chain), category of stores (fast food), the number of times a consumer shops and the amount of money spent during those visits. This gives us absolute precision to target segments of accounts based on spend history and share of spend in a category. Additionally, we can target differently based on a consumer’s engagement with the system. So we can target based on how many offers a consumer has received, how many they have activated or how many they have redeemed.

Why will the consumer like the Cardlytics offering as opposed to becoming nervous about their privacy being invaded through their bank statements?

First, the offers come through the bank rewards program – a highly trusted source. Second, the rewards are rich and very relevant. Offers are based on an individual’s spending history and typically range in value from 10% – 25%: the merchants are comfortable with this value of reward because the offers are so precisely targeted and they only have to pay when a consumer actually makes a purchase. Third, for those consumers who don’t like the solution, we make sure there is a very straight-forward and easy-to-find opt-out that requires a single click. Thus far, our opt-out rate is under 2%.

How does pricing and the revenue share with financial institutions work?

The merchant pays us only when a consumer actually makes a purchase. The merchant pays the offer amount as well as a placement fee to Cardlytics. The placement fee is typically about 10% – 15% – depending on the size and brand of the merchant. We share a part of the placement fee with the FIs – on average we share about 25% of the placement fee depending on the size of the bank and the services the bank is undertaking

Do you see a branding and brand awareness opportunity for merchants/ advertisers versus strictly direct response? Where might this go?

There is absolutely a branding aspect to this solution. Merchants who place offers with us have their brand show up in the digital banking statements of consumers with no charge. They see their brand appear alongside the FI’s brand – some of the most nationally, regionally and locally respected brands in the world

In some verticals, or with some merchants, it may make sense to apply more of a branding model than a direct response model – we continue to assess.

How is Cardlytics funded?

Cardlytics is venture-backed. Our investors are blue-chip investors including: Canaan Partners out of Silicon Valley; Polaris Ventures out of Boston; Total Technology Ventures and ITC Holdings both out of Atlanta. We have raised a total of $25M in three rounds of funding

A couple of years from now, what is a milestone or two that you would like the company to achieve?

A couple of years from now, Cardlytics will have expanded through all the digital banking touch points a consumer has with their FIs and will have expanded the service overseas whereby we are live in five additional countries by end of 2013.

Follow Cardlytics (@cardlytics) and (@adexchanger) on Twitter.

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