As major players such as Google, Groupon, LevelUp and Square position themselves as next generation payment processors, the role of banks and other financial institutions in the emerging payment is a little unsettled.
The financial institutions are potential giants here — not just for payments, but as partners for targeted promotions. They have built-in customer and merchant lists, access to transaction history and a strategic imperative to add new revenue streams.
Players such as Cartera, Cardlytics and Edo Interactive are working closely with banks and other financial institutions for transaction marketing. American Express has taken a big leap forward with FourSquare and Facebook deals.
But generally speaking, will the financial institution industry make the cut? Stereotypes of the industry suggest they are risk averse and unfocused on smaller opportunities; un-nimble marketers; and overly worried about losing control of customers and their data for competitive and privacy reasons.
A new edition of IDC’s Consumer Payment Survey from its Worldwide Payment Strategies Group (Doc #F I N 2 3 5 5 9 4) sheds welcome light on where consumers are with banks and financial institutions in the new environment. The May 2012 survey of 2663 U.S. consumers found good opportunities for banks and other financial institutions with card-based reward/cash back programs.
The survey found that 43 percent of consumers are either “completely” or “very much” motivated by card-based reward or cash back programs. This is roughly unchanged from 2011.
It also found that mid-level consumers are most likely to be influenced by these programs. Roughly 60 percent of consumers earning up to $75,000 are motivated to work with a card that has rewards or cash back attached to it. Above that income, interest levels decline, presumably because consumers might be more attracted to service-oriented cards. (Lower income consumers have less interest because their lower levels of spending doesn’t qualify them for rewards.)
While the opportunities are rich, IDC suggests that bank-based rewards programs might have hit a premature plateau. “For the situation to improve, we believe that banks must partner with merchants on more targeted and attractive rewards that are less dependent on overall spending and more on specific shopping behaviors,” notes the report.