Bank Innovation's Wish List: Better Coupons

All I want for the holidays from my lender are better coupons.

While scoping out various innovations in banking all year, what has interested me most as a consumer is financial institutions’ heightened interest in commerce advancements and integrating merchant-funded rewards into consumers' transactions. Whom better to give me discounts than my card issuer -- whether that be a bank or standalone card company -- which knows my transactions most intimately, after all? But here’s the immediate problem if issuers disrupt the coupon space: You, issuer, say you can offer me better targeted deals than Groupon, but can you ink deals with retailers I actually like? Because that's what I most want from you this holiday: coupons that inspire me to shop.

But the truth is what I most like to buy – and also where I need the discount the most – won’t be what you will likely offer me because of my spend patterns. Independent stores, the shopping love of my life, aren’t good candidates for merchant-funded rewards, even when vendors do the due partnership diligence for the issuer. Everyday purchases, which are still a great fit and want from consumers, are a much better discount coupon for issuers to provide. But until issuers can dish discounts on the independents, too, the Groupons of the world will have a place in the market. Which leads me to the second problem that exists today.

Beyond partnering up with the "right" retailers, the other challenge issuers have when trying to seize daily deal business away from its Groupon ringleader is that the wonder in shopping is taken away from the consumer. Here's how: In buying, there’s something novel about the act of discovery of finding things, which Groupon, its copycats and good 'ole actual brick-and-mortar shopping allow a consumer to do. In other words, maybe the coupon I most want is for a retailer I never shopped at before? That's why if banks want a cut of commerce through a daily-deal-type model, they should remember this: a delight in shopping is the discovery of something lovely. Certainly, some vendors have been dabbling in this arena so that issuers can help provide this discovery experience for their customers, too. Truaxis, for instance, shows consumers what other shoppers like them want, Cartera Commerce grants web surfers coupons based on their searches, and PayPal is heavily innovating in the scene with digital wish-listing, to name just a few recent efforts. Plus, as the digital wallet era matures, the loyalty/coupon dynamic will constantly refine itself to meet consumers' wants and needs.

That aside, and focusing strickly on the short-term, here is my coupon wish list to become incorporated into my transactions, some of which, issuers already provide:

Coffee
Whole Foods
Bloomingdales
Movies
Museums
Bars
Travel
Independent, well, anything
Spas

In return for the discounted goods, dear issuer, I’ll keep swiping your card -- while humming a Christmas tune.

Tags: Cartera, Groupon, PayPal, Truaxis, commerce, coupons, loyalty, merchant-funded incentives, mobile, shopping

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Comment by George Colwell on December 20, 2011 at 2:33pm: Merry

Good points. The problem is that the coupon and incentive programs are funded by the retailers. This means that those retailers with deeper pockets will always have more offers out there either as traditional coupons or as merchant funded incentives as they tend to have larger marketing and incentive budgets. The independents can play in the shotgun arena of coupons however they will probably not be able to afford to participate in the merchant funded incentives space. To prove the point a number of things on your list, like bars, spas, and coffee, tend to be common staples of the Groupon offers I see in my area. To your point though this are hit and miss and are not driven by my preference in location or specific retailer.

To your point about trying new things. With merchant funded incentives, based on an analysis of previous purchases, I think that there is a huge opportunity here. When retailers figure out that it is one thing to give existing customers a free gift card but it is an entirely different thing to generate new foot traffic through your store. If I was looking a building out a campaign I would want to target users who have spent a specific amount with one of my competitors within the last 6 months. Think about Crate and Barrel offering an incentive to customers who are active shoppers at Ikea. Or for you Bloomingdales providing incentives for regular Nordstrom clients. Credit card issuers and banks have this type of information. Only time will tell if they will sell it this way.

Comment by Frank Rauscher on December 20, 2011 at 3:56pm: Merry Mary,

Good post.

You wish is too sophisticated!

The biggest banks are still trying to learn (or re-learn) the basics of banking. They grew by acquisition for so many years that they forgot how to do basic math, treat customers with respect, provide good, suitable consumer credit, etc. .

Your dream is legitimate but beyond the realities that the banks must first become good at banking.

It may be better for a true marketing retailer to buy a small bank, skin it, and use the transaction processing skeleton to do your task. Say, didn't Walmart try that once? But the big banks were against true competition and squelched that attempt.

Any investment bankers out there have such a retailer?

Comment by Mary Wisniewski on December 20, 2011 at 4:08pm: Thanks, Frank. A girl can dream. ; ) What's your FI wish list?

Comment by Mary Wisniewski on December 20, 2011 at 4:13pm: George, any innovative players out there right now in the space that have caught your eye?

On another note, I'm with you 100% in regards to issuers trying to get consumers to try new things. I thought Visa made a smart play with its Gap pilot a while back and hope to see more of this sort of dynamic grow.

Comment by Frank Rauscher on December 20, 2011 at 4:27pm: MY FI dream would be for a woman to be the executive in charge of this type of Future Banking!

Most men do not appreciate the value of "shopping" in the same manner as women. Yet women control more money than men.

Comment by George Colwell on December 20, 2011 at 4:28pm: There are a couple of applications I like.

In the merchant funded incentives space I like FreeMonee.I think they have a great point of view and have developed proprietary technology to facilitate the matching of offers to customers.

In the coupling space take your pick of white label group on like service providers. Again for card issuers and banks I think they can and should be a little more sophisticated in this space and don't think that a group on like shotgun approach is something they should get into.

I think the real play will be when PFM software is integrated into an merchant paid incentive scheme with aggregated transaction data across all financial service products driving the offers. In the PFM space I like Meniga. They have innovations in peer based grouping, and gamification of financial transaction data that makes it fun for a client to learn more about their own spending and finances and that other solutions lack. I also like that, unlike some of the other solution out there, it was built specifically for integration into existing bank systems and processes.

Comment by Mary Wisniewski on December 20, 2011 at 4:46pm: Frank, I like your vision! I'd sign up for such a bank.

Comment by Mary Wisniewski on December 20, 2011 at 4:47pm: Thanks, George. Meniga looks really cool.

Comment by Mary Wisniewski on January 9, 2012 at 12:43pm: Thomas, that's lovely news! I'd love to hear more. What's your Wednesday morning look like or even tomorrow afternoon? My direct email is mary@royalmedia.com.

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