Banks start selling info on your secret credit card purchases.... could be a gold mine for banks
Data on your spending habits could be a
gold mine for banks
Published
NEW YORK - There’s a powerful new player
watching what you buy so it can tailor product offerings for you: the bank
behind your credit or debit card.
For years, Google and Facebook have been showing ads based on your
online behavior. Retailers from Amazon to Walgreens also regularly suction up your
transaction history to steer future spending and hold your loyalty.
Now banks, too, want to turn
data they already have on your spending habits into extra revenue by
identifying likely customers for retailers. Banks are increasingly aware that
they could be sitting on a gold mine of information that can be used to predict
— or sway — where you spend. Historically, such data has been used mostly for
fraud protection.
“Ten years ago, your bank was like
your psychiatrist or your minister — your bank kept secrets.”
Suppose you were to treat
yourself to lunch on Cyber Monday, the busiest online shopping day of the year.
If you order ahead at Chipotle — paying, of course, with your credit card — you
might soon find your bank dangling 10% off lunch at Little Caesars. The bank
would earn fees from the pizza joint, both for showing the offer and processing
the payment.
Wells Fargo began customizing
retail offers for individual customers on Nov. 21, joining Chase, Bank of
America, PNC, SunTrust and a slew of smaller banks.
Unlike Google or Facebook,
which try to infer what you’re interested in buying based on your
searches, web visits or likes, “banks have the secret weapon in that they
actually know what we spend money on,” said Silvio Tavares of the trade group
CardLinx Association, whose members help broker purchase-related offers. “It’s
a better predictor of what we’re going to spend on.”
While banks say they’re
moving cautiously and being mindful of privacy concerns, it’s not clear that
consumers are fully aware of what their banks are up to.
Banks know many of our
deepest, darkest secrets — that series of bills paid at a cancer clinic, for
instance, or that big strip-club tab that you thought stayed in Vegas. A bank
might suspect someone’s adulterous affair long before the betrayed partner
would.
“Ten years ago, your bank was
like your psychiatrist or your minister — your bank kept secrets,” said Ed
Mierzwinski, a consumer advocate at the U.S. Public Interest Research Group.
Now, he says, “they think they are the same as a department store or an online
merchant.”
The startup Cardlytics, one
of the field’s pioneers, runs the offer programs for Wells Fargo, Chase and
other banks. Though these partnerships, Cardlytics says it gets insights on
about $2.8 trillion worth of annual consumer spending worldwide.
A Cardlytics rival named
Augeo runs a similar program with other banks, which it declined to name.
American Express has an in-house program for its cardholders. Visa targets
offers on Uber’s app for credits toward rides and food delivery.
Even though banks only know
where you’ve shopped — and not specifically what you bought — they’re often
able to make educated guesses. After all, it’s not likely you’re at a liquor store
for the potato chips.
The bank can then infer other
things you may like. It would have a pretty good idea that you’re about to
travel if you’ve charged a flight or hotel stays. HSBC is looking into using
that data to set up automatic alerts, so that it wouldn’t decline your card use
as fraudulent when you start charging for meals in Kathmandu or Karachi.
The next step is to make
location-specific offers, perhaps for a car rental, as soon as you land. Marcos
Meneguzzi, HSBC’s U.S. head of cards and unsecured lending, said cardholders
will welcome such offers, at least when they’re relevant. But he warns that
banks could easily overstep and lose their customers’ trust.
Many of these efforts remain
in their infancy, and it’s not yet clear how well they’ll catch on. The
Cardlytics programs, for instance, don’t push offers through notifications. You
have to look for them in your banking app or website.
Abeer Bhatia, an executive
with Chase’s credit-card business, said commissions barely cover operational
costs. To Chase, the program is more important for incentivizing
rewards-conscious consumers to use its cards. If a Chase card gets you an extra
10% at Rite Aid, why pull out your Citi card?
As far as these companies are
concerned, Americans have repeatedly demonstrated that they value freebies and
discounts more than intangible privacy concerns.
“Consumers understand the
banks are giving them ways to save money based on how they shop,” said Scott
Grimes, CEO and co-founder of Cardlytics.
But banks often don’t explain
clearly what they’re doing with your data, even though they sometimes share
your transactions with outside data companies such as Cardlytics to process
offers. And many banks don’t seek explicit consent, instead including these
programs by reference in general agreements for the card or online banking.
“It’s totally long, and
people don’t read that,” said Saisattha Noomnual, a graduate student in Chicago
who gets targeted offers through her Chase and Bank of America cards.
Under federal law, banks
merely have to let you withdraw from marketing, or opt out. That’s difficult to
do if you’re not aware it’s happening.
Noomnual said she can only
guess she gets more offers for Starbucks because she visits Starbucks a lot.
She reasons that based on how well banks analyze her spending for fraud alerts.
While she said she doesn’t mind that, she wishes banks were more forthcoming.
Bank of America declined
comment. Chase said it tries to keep disclosures simple and understandable
without overwhelming consumers.
Banks insist they don’t share
personal information with other companies because they replace names with
anonymous ID numbers. Privacy researchers, however, have shown that such
data can be “de-anonymized” under the right conditions.
Privacy advocates worry that
past transactions could come back to haunt you. Frequent visits to fast-food
joints might flag you as a health risk, which could be a problem if your health
insurer could pay to learn about that. Auto insurers might grow wary of
cardholders who run up large bar tabs.
And ultimately, these
targeted offers could inadvertently encourage people to overspend or double
down on unhealthy habits such as fast food.
“Consumers aren’t aware of
the subtle nudges apps are giving them to buy, buy, buy,” Mierzwinski said.
“They are basically digging deep into your psyche and figuring out how to
manipulate you.”
Comments
Post a Comment