Technology: Card transaction analytics
Why it's one to watch: The company combines transaction marketing with daily deal couponing and online banking to help banks provide a new service to customers.
Cardlytics, of Atlanta, Ga., plays in the "merchant funded rewards" space, a nascent industry where banks allow merchants to offer customers rewards and discounts through the online banking channel, based on customer card transactions.
But it's Cardlytics' focus on data analysis and its sense of how it can apply this to financial institutions that makes it a company to watch.
Banks never share any personally identifiable information on Cardlytics' platform. It looks at anonymized transaction data only and matches merchant offers based on a forecasted proclivity to buy.
Merchants only pay if the offers are successfully redeemed, and Cardlytics shares that revenue with the banks.
"We have access to each transaction for all customers across all bank payment products at a very detailed level, and this makes us very unique and it's the asset upon which we base all innovation," says Lynne Laube, president and COO of Cardlytics.
In Cardlytics' model, banks present offers to customers via electronic statements. But users will soon be able to activate offers via the ATM and through social media sites like Facebook and Twitter.
Cardlytics will soon add even more granular Stock Keeping Unit data to its mix.
Its data model may do an end-run around the Durbin Amendment, which has compressed bank revenues from debit card interchange, and is forecasted to make many of the banks' own loyalty and rewards programs too expensive to operate.
Today, merchants spend nearly a trillion dollars on traditional advertising, like circulars and coupons. By shifting even a percentage over to Cardlytics' more targeted approach, "this could dwarf the impact of Durbin," Laube says.
Cardlytics is on a roll: It works with 100 to 200 financial institutions so far, including PNC Financial Services Group Inc., and more than half of the top 100 national merchants, as well as hundreds of smaller, local merchants.
Cardlytics says it's on track to reach 75 million households by second quarter 2012.
And it's flush with cash following $33 million in new financing led by Groupe Aeroplan, Canaan Partners, Polaris Venture Partners, TTV Capital, ITC Holdings and Kinetic Ventures, which had all invested in the company previously.
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