A couple of days ago the WSJ ran a piece on Visa and MasterCard using cardholders’ purchase data to target Internet advertising. Think this data might be valuable? From the article:
The trove of details about people’s credit-card activity would be a gold mine, ad executives say, because it illuminates a person’s budget, where they shop, what they buy and how they spend their time. “The combination of actual purchase behavior with attitudinal and demographic information provides an unparalleled understanding of the consumer,” MasterCard’s document says.
The article discusses potential use cases for leveraging purchase data as well as the privacy implications of linking cardholder purchasing data to that same customer’s web profile for targeting web advertising. Because of privacy concerns, the card associations’ plans are either “scaled back” or in “preliminary” stages for now and they are moving down the road of selling aggregated purchasing and segmentation data.
Just because Visa and MasterCard can’t work with data at the individual customer level doesn’t mean banks can’t. I’ve written before about how banks can use this data to offer merchant-funded rewards, but I also agree with the take in American Banker earlier this week about how the daily deal business is ripe for disruption, too. From the article:
Banks are ideally positioned to do this targeting. They have access to customers’ transaction data, which they can use on an anonymized basis to target deals. Every purchase on your card is a preference you have expressed. Amazon.com is trying to use its knowledge of your preferences to send you targeted deals via email and Kindle, and some have called Amazon the most fearsome Groupon competitor for that reason. But it pays to keep in mind that 80% of the average person’s disposable income is spent within 20 miles of home.
Banks and credit unions already have the attitudinal and demographic information along with purchasing behavior that Visa and MasterCard can’t directly use. So, rather than get a random Groupon offer for a colon cleanse or botox injection, I’d love to see my bank use what they know about my purchase behavior to give me a deal at a restaurant or store I might like. These recommendations can be based on customers with similar transaction history just like last.fm recommends music based on my listening history or Netflix recommends movies based on my viewing history.
Advances in business intelligence technology and continued declines in the cost of processing power and storage make the retention and analysis of this data feasible at a fraction of what it would have cost just a couple of years ago. This type of analysis can be leveraged in other flavors of offer programs, such as Foursquare.
If the data is only used within the financial institution (or sent to a trusted provider that administers the program) why wouldn’t a customer sign up for this, particularly existing users of daily-deal services like Groupon? It’s good for the customer, banks can use it to deepen relationships with merchants, and, yes, they can use it to improve checking account profitability and avoid levying new fees on customers.