An introduction the world of card linked offers including how they work, where the transactional data comes from and who pays for them.
WHAT ARE CARD LINKED OFFERS?
A card-linked offer (CLO) is an incentive that a retailer or a bank can make available to prospective customers by attaching a deal to the user’s credit or debit card. A CLO is redeemed by a consumer shopping in the same way they normally would, ensuring that the card they pay with is the same one that the offer is linked to.
The offers themselves take the form of cash or points (for loyalty schemes) which are then stored for withdrawal (once a certain cash threshold has been accumulated) or added to the balance of the existing loyalty scheme.
HOW DO CARD LINKED OFFERS WORK?
There are two types of card linked offers:
“Always on” deals that are activated when a user owns a particular type of payment card
“Pre-registration” deals that are activated when a user registers their intent to use a specific offer
The “always on” deals are commonly run by card providers. The card provider will monitor a consumer’s spending, looking for transactions that are due for reward. A common example of this would be “2% cashback on all spending” in which the card provider then adds money back onto the card that was used to pay at the end of each month.
The “pre-registration” deals are commonly run by consumer facing shopping portals (such as cashback or loyalty sites). They require a user to login and ‘activate’ an offer from a specific retailer. The rewards for these offers are high (usually between 5% and 15%) and the company providing the deal can serve different offers based on factors such as customer location, previous purchase history, time of day, etc… This helps retailers to deliver on their marketing objectives and gives a reason for them to fund offers of this nature. Once the transaction has been made, the shopping portal will add the reward to the user’s balance which can be redeemed/withdrawn at the user’s convenience (usually after the retailer’s returns period has elapsed).
HOW ARE CARD LINKED OFFERS FUNDED?
The majority of schemes that are popular with users are funded by the card provider (rather than the retailers that are featured). The credit card companies fund the rewards in two ways:
Through the transaction fees that they make retailer’s pay every time something is bought
Through the fees that consumers pay in interest or annual fees paid for being a card holder
These funding methods demonstrate why many of the offerings have low rewards of one or two percent on spending. In 2015, laws were passed that limited transaction fees to 0.2% of customer spend on debit cards and 0.3% on consumer credit cards meaning that the funds for some of the card linked schemes came to an end.
Other schemes which run in conjunction with a retailer (usually through a shopping portal of some sort) are funded by retailers themselves. The retailers agree to pay the shopping portal a percentage of the order value (usually 7%). The shopping portal will in turn set an amount that they give to the customer (usually five of the seven percent that they receive).
WHERE DOES TRANSACTIONAL DATA FOR CLO’S COME FROM?
Schemes that are made available by card providers already have transactional data at their disposal. This makes it very easy for them to set up offers regardless of whether a retailer is interested or even aware of them. The deals they create are often used as a point of differentiation in what would otherwise be a commoditised credit card market.
Schemes in which card linked offers are made available by a cashback or loyalty platform are a little different. The transactional data comes from the retailer and so any retailer wishing to run Card Linked Offers with one of these sites must grant them access to transactional data both online and in store.
DO CARD LINKED OFFERS REQUIRE TECHNICAL INTEGRATION?
Running a card linked offer does not require technical integration. In the case of loyalty or cashback sites, the process of granting access is done through a one- or two-page legal agreement instructing the retailer’s own payment provider to allow the cashback or loyalty platform to query its database of transactions. This query will involve a hashed version of the card number and if matches are found, the cashback or loyalty platform can pick