Banks want to turn data on you into ex­tra rev­enue

Houston Chronicle - - BUSINESS - By Anick Jesdanun

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.

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 per­cent 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 cred­it­card 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 per­cent 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 co­founder 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.

Jenny Kane / As­so­ci­ated Press

Banks are in­creas­ingly aware they have in­for­ma­tion that can be used to pre­dict or sway where you spend.

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