Will Merchants Hand Over More Data to Make Mobile Wallets Work?

  • Philip Ryan
  • April 11, 2017
  • 1

Online retailers have several advantages over their brick and mortar counterparts. They have lower costs, plus a place on the smartphone screens (and in the hearts) of younger shoppers. In a recent Piper Jaffray survey, teens’ favorite website was Amazon (43%), followed by Nike (5%).

Yet the bulk of shopping still takes place in brick and mortar stores. E-commerce purchases in 4Q 2016 made up just 8.3% of total sales volume, and that includes all the last-minute junk you ordered in panic for Christmas presents (like the socks for that cousin, who just announced he was coming over, and told you to make that special dinner he likes so much).

Silvio Tavares, president and CEO of the Cardlinx Association, a coalition promoting card-linking technology, believes brick-and-mortar merchants may be ready to give FIs and payment networks access to the industry’s most jealously guarded secret — SKU-level data. (SKU stands for Stock Keeping Unit.)

Card-linking allows merchants to push offers to customers via their mobile devices, perhaps even their banking apps. When a customers accepts an offer and makes a purchase, the offer is automatically applied, as long as the linked card is used. The data about what is bought, however, is generally not shared with one’s bank or the payment networks. They simply see the store name and purchase amount. Getting the two together — purchase information, as well as the totality of one’s financial picture– has so far proved elusive. Mobile wallets (with the exception of Starbucks, as usual) are floundering, because customers don’t see the added value versus using their cards. Card-linking technology promises to bridge that gap.

This SKU-level data, after all, was part of the promise of MCX, now part of Chase Pay. It’s still not clear how Chase Pay will handle its headstart with merchants in rolling out loyalty and rewards, but Tavares and his team are working hard to bring card-linked offers and rewards into digital banking the way Cardlytics did with BankAmeriDeals. It doesn’t matter which card, either. “The average annual spend per customer for debit is $12,227, compared to just $9,262 for credit,” wrote Dani Cushion, CMO of Cardlytics, in a recent blogpost.

Bringing offline spend online, and bringing that data into the view of FIs and networks is, according to Tavares, “the trillion-dollar question.” But Tavares is bullish on the prospect of merchants delivering such data, as well he might be, since Cardlinx is owned by businesses promoting card-linking (Mastercard, Discover, FIS, First Data, Microsoft, among many others).

“Merchants are going to be more willing to [share SKU-level data],” Tavares told Bank Innovation last week, because teaming up with financial players is “one of the principal ways to be more effective themselves.”

Times are tough in retail, Tavares went on. “Brick-and-mortar is in a straight-up street fight. Macy’s — they’re out there just trying to survive, and they don’t have access to Amazon-type data,” he said. “They understand data is the difference between winning and losing. To share data with trusted partners is to look to the future.”

Retail selling is all about partnerships — suppliers, distributors, the payments ecosystem — while Amazon is more vertically integrated, and is expanding into new and sometimes surprising businesses all the time (like brick-and-mortar stores). Margins are thin. Any advantages data-sharing can give will be seized on. Payments company Harland Clarke’s purchase of the digital coupon service RetailMeNot for $630 million bears witness to both the consolidation among fintech companies and the need to unite online and offline.

Partnering may be the only way for brick-and-mortar to survive. “It’s really difficult to do this all by yourself,” Tavares said.

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Philip Ryan is Senior Editor of Bank Innovation and Senior Director of INV Fintech. He began covering financial services in 2012 and has more than 15 years' experience in online journalism. He can be reached at pryan@royalmedia.com.

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