BillShrink Inc. will offer its merchant-funded rewards service through Jack Henry & Associates Inc. — the first such partnership BillShrink has announced to help it reach a wider range of banks.
The agreement to make BillShink's service available to Jack Henry's online banking customers comes at a time when core banking providers are working to reinvent themselves and offer new products and services to help banks differentiate their online banking products and attract more revenue. The deal was announced Wednesday.
BillShrink, of Redwood City, Calif., could benefit from the significant distribution it gets through the Monett, Mo., vendor.
"Merchant-funded rewards is of growing importance in the marketplace," said Jacob Jegher, a senior analyst at the research firm Celent.
"Financial institutions are looking for new streams of revenue in the retail banking space and it is attractive for consumers to be able to manage a rewards program directly from their own bank account."
Schwark Satyavolu, BillShrink's co-founder and chief executive, said in an interview that the partnership will give BillShrink access to Jack Henry's more than 7 million NetTeller online banking and iPay bill-payment users, and 1,200 financial institutions. "It will be available automatically to all of their banks and users, and there are no additional steps required to gain access to this functionality," he said.
Satyavolu said that the accord with Jack Henry is the first distribution deal it has announced, but BillShrink has other unannounced contracts that will make its service available to an additional 7 million online banking users.
BillShrink's technology searches debit and credit card statements and makes comparisons on various products and services, recommending cheaper alternatives.
It competes with a number of companies in the merchant-funded rewards category, including Cardlytics Inc. of Atlanta. Cardlytics has not announced any partnerships with core providers such as Jack Henry, though it has, within the past year, announced partnerships with at least one regional bank, Regions Financial Corp. of Atlanta.
"We have run thousands of campaigns for hundreds of merchants and touch over 100 million transactions a month," said Rod Witmond, senior vice president of product management and marketing for Cardlytics.
Witmond said Cardlytics was also in conversations with at least one online banking provider.
"We are going after all sorts of banks, from the biggest in the U.S. to the smallest, either directly or through the [third-party] providers," he said.
Industry observers said BillShrink's partnership comes at a critical time for banks, which are struggling with whether or not they should cut rewards programs tied to debit cards in anticipation of a 12-cent cap on debit interchange proposed by the Federal Reserve Board.
"It is more difficult to fund debit card rewards programs if interchange gets cut," said Ron Shevlin, a senior analyst at Aite Group LLC of Boston.
"From a strategic perspective [rewards programs] are critical, customers want them and they drive engagement and utilization of the cards."
Though BillShrink does not offer a traditional rewards program, it represents the next generation of such programs, Shevlin said, by offering consumers value and by shifting costs of the programs to the merchants.
"Part of what we are looking to do is make sure we provide an innovative suite of products and services at the forefront of payment innovation and online financial innovation," said Bill Ready, the president of iPay Technologies, which Jack Henry bought last year.
Ready said one of the key components of the relationship is that Jack Henry will offer BillShrink's service free of charge to the banks it serves.
"This is a fee-generation opportunity and it is not an incremental charge to the financial institutions," Ready said.
Stessa Cohen, research director of banking industry advisory services at Gartner Inc., said vendors could either build new services from scratch or partner with a third party to accomplish the same objective.
Jack Henry said it has typically done both. "We have a rich history of partnering where it makes sense," Ready said.
Jack Henry also has a partnership with Big Rewards, from Saylent Technologies Inc. of Franklin, Mass.
That program, aimed at customer retention and increasing deposits, offers bank customers preferred pricing based on their relationships with the bank and their transaction histories.
Though Jack Henry provides core processing to smaller banks primarily, Satyavolu said BillShrink's aim is to offer its product to banks of all sizes.
