Bank Of America To Roll Out Deals Service To Cardholders

Customers of Bank of America Corp. (BAC) will soon begin to receive merchant offers through their online bank accounts as part of a service that tailors promotions based on cardholders' purchase activity.

The Charlotte, N.C., lender will begin testing BankAmeriDeals Wednesday with employees in North Carolina, South Carolina and Nevada. It plans to make the service available to all debit and credit cardholders in mid-February, a spokeswoman for Bank of America said Tuesday.

The service, based on software developed by Atlanta-based vendor Cardlytics, allows customers to activate offers for specific retailers within their online-banking portals and redeem those deals by using their debit or credit card at the merchant. The discount doesn't show up when the customer makes a purchase at the retailer; rather, it appears as a cash-back reward at the end of the month.

Customers "don't have to clip coupons," Tara Burke, the Bank of America spokeswoman, said. "They're not [going] store to store to figure out who has the best deal. It's about deepening relationships with our customers."

PNC Financial Services Group Inc. (PNC) and Regions Financial Corp. (RF) are among 200 financial institutions that also use the Cardlytics program, said Scott Grimes, the vendor's chief executive. Grimes declined to confirm whether it is working with Bank of America.

Burke declined to discuss the specifics about how the service works but said it doesn't share customers' personally identifiable information with outside vendors or merchants.

Cardlytics' software allows merchants to tailor offers to target specific types of customers based on transaction data, Grimes said. For example, a clothing retailer could offer 10% off to customers who have shopped at a competitor's store in the last several months within a certain ZIP code. In addition to using cardholder-transaction data to target customers, it also uses online bill payments, Grimes said. All transaction data are masked in such a way that doesn't identify cardholders, he said.

About 500 merchants use the service, including Macy's Inc. (M) and McDonald's Corp. (MD).

Many large banks have eliminated debit-card-rewards programs over the last year in response to the Durbin amendment, a provision in 2010's Dodd-Frank Act that cut in half the amount of money banks can charge merchants each time a customer swipes a debit card. Many banks used those fees, called interchange, to fund rewards programs.

Bank of America, one of the banks affected by the Durbin amendment, last year ignited consumer uproar when it announced plans to charge customers $5 per month for use of a debit card. It later scrapped those plans, as did J.P. Morgan Chase & Co. (JPM), Wells Fargo & Co. (WFC) and other banks that had announced similar plans.

Under the Cardlytics system, offers are paid for by merchants, which hope the service will drive additional sales from new and existing customers, said Grimes, who cofounded the company in 2008 and is a former executive of Capital One Financial Corp. (COF).

"We are able to bring their customers very valuable deals, much more valuable than you could ever do with debit interchange, at no cost to the bank," Grimes said.

The service helps banks by tightening relationships with cardholders, he said. "We know as customers use our service they tend to become higher-quality online bankers," which "have lower attrition and tend to use [their] cards more and tend to be more receptive to cross-sell offers."

Cardlytics shares a percentage of the revenue it generates with many of its bank clients, Grimes said. That percentage varies from client to client, though some banks don't receive a cut, he said.

-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214; andrew.r.johnson@dowjones.com

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