A fledgling industry group formed to monitor retailer rewards programs linked to debit and credit card use is taking aim at combating fraud.
The CardLinX Association on Monday released a set of guidelines that are directed at helping the parties involved in merchant-funded offers including financial institutions, publishers, advertisers, merchants, merchant acquirers and payment networks detect when they are being ripped off.
A consumer could, for example, buy something with a card-linked offer, then return the item for the full-price rather than the discounted price. "That's the main fraud scenario," says Silvio Tavares, the president and chief executive of the four-month-old group.
A bank would not know if a consumer claimed a coupon for a purchase unless the shopper used an offer distributed by the bank. "There has to be a standard way to communicate," says Tavares. "There are so many cooks in the kitchen."
Executives from Bank of America (BAC), PayPal, LivingSocial and Facebook are members of the group, which aims to improve the way they work together to improve the consumer and merchant experience.
"The problem is it's tough to get things done at scale without standards," says Tavares, who describes CardlinX as the air traffic control for the card-linked offer space.
The broad and ambitious long-term vision of the association is to better connect supply with demand so that, say, a bakery doesn't throw out wasted loaves of bread at day's end. "It's clear there needs to be collaboration," Tavares says. "It's not altruistic."
The standard published, called Chameleon, outlines the way a rebate reversal should occur, while also establishing data requirements designed to curb fraud, among other things. The standard is now available for member comment.
The CardLinX Association is also readying three more standards (all named after animals). The forthcoming Cobra, for one, will set guidelines around consumers' use of several coupons at a single store and the sequence in which they are applied. A digital advertising standard called Hummingbird is in the works to better help merchants know which digital ads delivered what results, a metric merchants struggle to get their hands on.
Banks have been piloting ways to serve up card-linked offers to customers to varying degrees of success in recent years.
Ally Bank, for example, canceled its card-linked offers program in 2013 due to what the bank described as a lack of value for the customers. Bank of America, meanwhile continues to praise its card-linked offers program, which is called BankAmeriDeals.
One ongoing issue is the difficulty of getting consumers offers that they actually want. Tavares points out that he's often pitched on beauty products. "I don't have a lot of hair," he says.
Generally, the merchant-funded programs distributed by banks work something like this: consumers receive a specific merchant offer based on the transactions within their online or mobile banking account. For example, a customer who frequents Starbucks could get a 10% deal from a local coffee shop. The idea is to pitch a consumer with a relevant discount and remove the barrier of paper to claim the deal.
But bank programs are just one way customers can discover discounts; search is another way to get pitched on deals.
The future will have to bring targeted offers, tied to transactions and users' search habits, Tavares believes. "The best predictor of the future is the past," he says. "It's better than what marketers do now, which is spam."
To be sure, in such a world, consumers could benefit from the help of a digital financial advisor. Analysts have identified banks as best suited to fill a growing need for guidance in a world where shopping is touch to buy and mobile apps and sites are laced with discounts that serve as bait to get people shopping. Customers, for example, will need to know what their overall financial picture is before they "save" on a new dress, only to find the next day they can't cough enough up for rent.
Businesses, including banks, will become increasingly pressured to prove the value they give consumers in exchange for their data, predicts Tavares. In 2014, he expects consumers to become more protective of their data as they realize companies are making money off their interest in skydiving and purchases of skinny vanilla lattes. Customers will increasingly expect something in return for sharing their interests and transactions including services such as offers that connect to their purchases.
"The future will be intelligent with services [based on payment data]," says Tavares.