Imagine that you had an amazing meal last night at Ruth’s Chris Steak House. You look at your checking account online this morning, and to your surprise, you find a $10-off coupon for your next visit at Ruth’s Chris. You simply click to redeem your coupon. You do not have to print it out because the restaurant will recognize your debit card and apply the discount the next time you eat there. Does this sound too good to be true?
Many banks are introducing debit rewards programs that do exactly what is described above. It is believed that many more banks will introduce eStatement advertising to their customers because the programs have been so successful. Extremely relevant, targeted ads will be integrated into the list of recent purchases on consumer’s electronic bank statements.
Debit programs have been controversial in the past because of how much transactional and behavioral data the banks know about an individual. This data is used for behavioral marketing, in which personal information is used to target advertising to individuals. Should you be concerned with security of your information? Banks say the software runs on their own servers, so consumers’ personal data do not leave their secure network. Consumers have the option to opt out of the program, but most do not.
Both banks and advertisers alike can profit from a debit rewards program. So far, advertisers receive an average sales bump of $5.49 for each dollar spent on marketing to current customers according to a Washington Post article. Companies can promote loyalty among current customers because they already know the customer’s individual interests. The checking account ads also offer banks an alternate way to make money off debit cards; the discounts are paid for by the merchants, rather than the banks, in exchange for the ability to narrowly target who receives them. Banks see these ads as a potential substitute for popular rewards programs because most consumers would prefer to receive larger discounts on relevant spending than small percentages of cash back.