Already Visa (V) and MasterCard (MA) are marching into this new terrain by proposing to sell insights gleaned from credit-card spending data, The Wall Street Journal reported on Tuesday.
The two largest credit card networks have plans to sell marketers an analysis of anonymous data that has been sorted into various demographic segments, such as people who like to travel, the Journal reports. The data could be used to create targeted online advertising. So far, neither company has implemented these plans.
Banks are also poised to get into this business. Silicon Valley startup FreeMonee is one of the third-party marketing companies acting as broker between banks and merchants. The company will not share the names of any partners at this date, but says it is launching a merchant-reward plan with a major U.S. bank on Nov. 17.
Instead of targeted ads, banks' data will drive targeted coupons and deal incentives directly through a customer's checking account. For example, gadget buyers could get a coupon for a major electronics retailer through their bank debit card.
Too Late to Worry About Privacy?
As financial institutions seek to replace revenue cut under the Durbin Amendment -- part of the financial overhaul that limits the fees that banks can charge retailers -- they are exploring new business avenues. New technology -- and consumers' seemingly relaxing attitudes toward financial privacy -- are making these new channels increasingly plausible.
In FreeMonee's system, transaction data is stripped of any personal information and completely anonymous when the merchant sees it. This keeps consumers anonymous while still allowing retailers to see who they should target a discount.
"Banks need to replace revenue [lost under the Durbin Amendment]," says Jim Taschetta, the company's chief marketing officer. "Transaction data is accessible. With the right analytics, it can create matched incentives."
Even as better technology protects privacy, consumers are growing more comfortable with targeted advertising and offers.
A survey the company conducted with Harris Interactive showed that 57% of the 2,572 people polled were OK with their bank using purchase history to provide more tailored advertising and coupon offers. For customers under 35, that comfort level rose to 66% saying that they felt comfortable letting their bank use their spending data for customized offers.
So is brokering your transaction data to get deals a bad idea? Paul Stephens, director of policy and advocacy at the Privacy Rights Clearinghouse, says the trend is frightening. But it may be that ship has already sailed. Already millions of consumers readily give up access to their transaction data when using third-party bill pay and budgeting web programs.
"There is no such thing a true free lunch," Taschetta says. "[Consumers have to] make sure value proposition is at the right cost."
Catherine New can be reached at email@example.com.