What Intuit Didn't Say

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Truth be told, most press release announcements either bore me to tears, or tick me off with their pompous bloviating. Isn’t it amazing how version 6.1.7b of a product that’s been around for 15 years is suddenly earth-shattering, transformative, and….wait for it…disruptive?

Well, the folks at Intuit are going to be ticked off at me for saying this, but upon my first reading of their press release of March 15th, I put the release into the latter category: “Intuit Financial Services Transforms How People Manage Finances at Banks, Credit Unions.”

Transforms? Really? The release says that bank and CU customers can see their account information from any source, transfer funds and pay bills, and save time by pre-populating data on tax forms. Been there, done that.

The release also mentions that consumers using the firm’s online banking platform can “save money on products and services they already buy without the hassle of coupons by activating targeted merchant discounts.”

Wait, what did they say?

It turns out that Intuit has partnered with Cardlytics to integrate — and more importantly, bundle — Cardlytics’ merchant-funded rewards offering into its online banking platform. As Intuit rolls out the new version, its customers will have to opt-out of offering the capability (which Intuit doesn’t exactly recommend that they do).

This, my friends, is huge news.

In a case of politics-makes-strange-bedfellows, merchant-funded rewards is what many banks and credit unions will be turning to in order to save their debit rewards programs (not to mention lower admin expenses on their credit card programs).  In a December 2009 Aite Group report I wrote titled Financial Services Rewards Programs: The Quest For Profitability I said:

“Merchant-funded networks will offset more than $5 billion in FI-based rewards program costs between 2009 and 2013, helping to reduce the percentage of redemption spending on air miles from 50% in 2008 to 35% in 2013. Furthermore, the need for improved analytic capabilities to demonstrate loyalty program impact on merchant sales in merchant-funded networks will help determine which merchant network assemblers succeed.”

What makes this ironic is that in the merchant/FI war, merchants won a battle by getting short-sighted legislators to reduce the interchange fee they pay on debit transactions, which put the FIs’ debit rewards programs in jeopardy. FIs meanwhile, are turning around and shifting the cost of those programs back onto the merchants.

But there’s a big, big difference in this latest turn. The interchange fee is a “cost” to merchants, while participation in FI-sponsored merchant-funded rewards programs promises to increase sales.

And thanks to better and improved analytics, these programs from vendors like Cardlytics, BillShrink, and Segmint — as well as newer and yet-to-be entrants who names I can’t mention just yet — will improve merchants’ ability to target offers to prospects and customers through FI online platforms.

But there’s a future promise that most merchants aren’t considering just yet: The opportunity to reduce a significant percentage of their marketing expenses. Today, a merchant can reach only a very small percentage of consumers, even if it’s dealing with the largest bank in this country. The effectiveness of the FI’s merchant-funded program may be orders of magnitude higher than the merchant’s marketing efforts in other channels, but it simply doesn’t scale.

Intuit’s announcement helps to jump-start the scale building. The release says that as Intuit rolls out this version, it will be reaching 6 million customers with its new platform.

If merchants could reach 60 million consumers, or better yet, 120 million consumers, through FI-sponsored merchant-funded programs they’d be able to shift a significant portion of their current expenses on advertising, couponing, and direct mail to a lower-cost, and more effective channel. Improved efficiency AND improved effectiveness.

Keep in mind, however, that most of these programs involve large, national merchants.  Cardlytics has a partnership with Vesdia to help fuel the participation of merchants in its offering. But like many firms of its ilk, Vesdia focuses on integrating large, national merchants into its network.

So now we come to the part of the story that’s really exciting, and that Intuit didn’t mention in its press release (not that they told me, either. I’m just reading into it).

Question for you: Which company in this country has a relationship with the most small businesses across the nation?

I don’t know the answer to that, but I wouldn’t be surprised if the answer was Intuit.

Think about what’s going to happen when Intuit leverages its small business relationships to take advantage of the marketing opportunity to reach millions of consumers through FI merchant-funded rewards programs more efficiently and effectively than they’ve ever been able to reach consumers before?

Integrating small businesses into the FI-based merchant-funded programs will not only enhance those small businesses’ marketing efforts, it will help Intuit differentiate its merchant-funded program AND its online banking platform from the competition.

Now if they’d only integrate Mint.com….

It’s important to note that while I think the potential to integrate small businesses into the program is exciting, Intuit isn’t the only firm integrating merchant-funded rewards into online banking.

In fact, just last week Jack Henry and BillShrink announced their partnership to integrate BillShrink’s statement rewards capabilities into Jack Henry’s NetTeller platform. BillShrink’s personalized bill analysis capabilities brings a different wrinkle to this offering than the Intuit/Cardlytics offering. One thing I didn’t see in the Jack Henry/BillShrink announcement was any mention of the Lodo PFM solution that Jack Henry plans to integrate with.

Looking ahead, these announcements portend big changes for banks. First off, while the revenue-sharing in place from these programs are unlikely to match the level of investments banks need to make in the online channel, they will generate some revenue helping the online start paying its way.

In addition, they’ll change the nature of the bank/merchant relationship. Banks will be on the same side of the table as merchants (at least more frequently). And — this is important — banks will piggyback on merchant-funded reward offers to steer customers to use certain payment methods (“here’s 10% of your next purchase at Home Depot — make it 20% if you use your Acme Bank credit card!”).

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