card-linking and o2o industry survey2017 card-linking & o2o industry survey 6 the younger cousin...

Card-Linking and O2O

Industry Survey2017

The CardLinx Association www.cardlinx.org

From Online-to-Offline

The CardLinx Association www.cardlinx.org |

Copyright 2017 All Rights Reserved For more information, or to become a CardLinx member email [email protected]


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Table of Contents

Executive Summary ........................................................................................................................................3

Key Findings ......................................................................................................................................................5

AI Assistants: The Next Big Digital Advertising Platform ...................................................................6

Card-Linking: The O2O Silver Bullet for Shopping Centers ..............................................................7

Widespread Acceptance: Prevalence of Card-Linked Offers ............................................................8

Card-Linking Growth Continues Unabated ...........................................................................................9

Sky’s the Limit: Advertising Budgets for Card-Linked Technology Could Exceed $10 Billion ......10

Branding & Rewards: Loyalty Surges ..................................................................................................... 11

More the Merrier: Merchants of All Types Embrace Card-Linking .............................................. 12

At the Top of Their Game: Marketing & Loyalty ................................................................................. 13

Appendix ......................................................................................................................................................... 14

About the CardLinx Association ......................................................................................................... 14

Survey Participants’ Industry Sectors: Diversity in Growth ....................................................... 15

Survey Participants’ Company Size: Maturing Ecosystem Entices New Entrants ............. 16




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Executive Summary

As card-linking continues to grow, the industry is expanding and diversifying, entering new industries, merchant categories and internet-connected devices at a fast pace. Card-linking is embraced by the online-to-offline (O2O) industry as the link between retailers, savvy consumers and tomorrow’s payment-enabled devices. While over 90% of American retail sales still occur in-store, nimble e-commerce companies are outperforming their brick-and-mortar competitors. This survey shows that card-linking is at a tipping point as more traditional retailers look to card-linking technology to complement their traditional marketing efforts and drive in-store traffic and sales. Survey participants include CardLinx members like Samsung, Facebook, Mastercard, Microsoft, Hilton Worldwide, Sears, FIS, First Data, Empyr and Affinity Solutions.

What Is Card-Linking?

Card-linking enables consumers to receive a discount or loyalty benefit automatically when they pay with a payment card that has been digitally linked to an offer or loyalty benefit. Leading card issuers, retailers, messaging apps and other digital publishers provide card-linked offers through mobile apps and loyalty programs. More than at any other time, card-linking is the value differentiator for online-to-offline commerce.

Giving Back

As the industry matures, card-linking is moving from cash back to giving back. More and more new companies are using card-linked technology to support socially responsible businesses, locally owned businesses or non-profit organizations. The CardLinx survey shows that not only the types of companies entering card-linking has grown, the variety of industries has grown as well the marketing departments that utilize it.

Internet of Commerce Things

Card-linking brings together all the industries that make payment-enabled Internet of Things (IoT) devices work: banks, digital advertisers, payment networks, payment processors and retailers. This seamless card-linking infrastructure has created a surge in loyalty rewards and programs using card-linking. With the latest technology: IoT, commerce bots, big data, targeted and targeted one-on-one consumer engagement, internet-connected cars and appliances, cloud computing wearables and digital assistants, retailers and brands are able to use card-linking to provide those contextual, personalized and experiential shopping experiences that consumers seek and generate real incremental revenue. According to survey participants, the most promising new digital advertising platform will be artificial intelligence (AI) assistants, which build upon IoT technology and overlays it with voice commands and responses.




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Executive Summary

New Technologies

Best of all, card-linking uses these new technologies to engage consumers where they are: on their smartphones, tablets or smartwatches and brings them into a physical store to receive a customized discount or loyalty benefit. This survey shows that card-linking is the silver bullet shopping centers are looking for to bring consumers back. No other marketing or technology tool does this as effectively and creatively and Chief Marketing Officers are starting to take notice. This year, the corporate department responsible for card-linking is no longer just marketing but increasing described as marketing and loyalty. The focus of card-linking has shifted to match its maturation, from offer-based promotions to relationship building consumer engagement through a loyalty program and frequently a smartphone app.

New Smart Shopping Centers

It is not surprising that the most successful brick-and-mortar stores are using card-linking programs for engagement and offers. Forty years ago, malls were transformative in the retail industry and today the transformative element is card-linking. From our survey, we know that almost all of the participants will be using card-linking this year to drive online-to-offline commerce. The opportunity is great and the diversifying card-linking ecosystem means even more industries can benefit from it, from cars to appliance and shopping centers.




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Key Findings

1. Shopping: The Killer App for AI In this survey, participants indicated that AI assistants will be the most promising new digital advertising platform. Algorithms for processing voice commands are far beyond the initial roll out phase and AI assistants already help consumers find products, make purchases and track packages. With increased focus and resources, card-linking and O2O delivered through AI assistants are next.

2. Card-Linking: The O2O Silver Bullet for Shopping Centers With traditional brick-and-mortar stores trying to find their footing in this era of retail trans-formation, the survey asked participants, “What will bring people back to shopping cen-ters?” 51% of survey participants responded with card-linking programs will help jump start attendance at shopping centers. Card-linking’s unique ability to reach consumers online and on mobile devices, bring them into a store and track their purchases, makes it the critical O2O technology that will help revive in-store traffic at shopping centers.

3. Card-Linking: The Momentum Continues This year 98% of survey participants will continue to use card-linked marketing or loyalty campaigns in the next 12 months and about the same percentage, 95% will participate in the online-to-offline commerce industry. Card-linking not only does magical things for con-sumers, it also has the seemingly magical ability to hold the consumer’s attention and bring them into a store.

4. Loyalty Rewards Surge in Popularity Compared to last year, the percentage of survey participants who are offering loyalty points as the reward grew from last year, from 12% of participants last year to 20% this year. O2O is moving from cash back to giving back as rewards are increasingly used to benefit others instead of the consumer. Focusing on socially responsible businesses and non-profits is a key driver for millennials, a burgeoning consumer group that has shown different purchasing habits than previous generations.




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The younger cousin of AI assistants are commerce bots, which are beginning to proliferate, especially on messaging and social media platforms. With robots learning our shopping habits and preferences, the future of retail might lead to not only the convergence of big data, cloud computing and personalized offers but also more efficient buying habits, leading to reduced prices. The CardLinx Association monitors the development of new payment and retail technologies such as AI assistants and commerce bots and helps members synthesize the impact of these new technologies on the card-linking and O2O ecosystems.

What is the most promising platform for new digitaladvertising technology?

AI Assistants: The Next Big DigitalAdvertising Platform

According to research company Gartner, there were 6.4 billion

internet-connected devices at the end of 2016 and that number will grow to 25 billion by 2020. Most of these Internet of Things (IoT) will also be payment- enabled, exploding the number and availability of the Internet of Commerce Things (IoCT). The survey participants decisively identified artificial intelligence (AI) assistants like Microsoft’s Cortana, Samsung’s Bixby and Apple’s Siri as the most promising digital advertising platform with 42% of the responses.

DigitalAdvertising

AI Assistants

Cars

Home Appliances

Other

Unsure

SmartWatches

Wearables (otherthan smartwatches)

12%

10%

13%

14%

42%

4%2%




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O2O Participation

Foot traffic to American shopping centers declined last holiday season and traditional brick-and-mortar retailers continue to see headwinds. With card-linking’s unique ability to drive online-to-offline commerce, survey participants see the technology as a silver bullet for shopping centers and traditional malls. Malls and shopping centers are a natural fit for card-linking technology as property managers can deploy site-wide rewards programs tied to purchases at stores. Shopping centers maintain a variety of shops at their location and the ability of card-linking to adapt to any industry makes it a natural choice for shopping mall loyalty programs.

23%

3%

10%

51%

13%

0%

10%

20%

30%

40%

50%

60%

In-mall promotionsand events

More traditional advertising

More online advertising

Card-linking programs Other

What will bring more people to the shopping center?

Card-Linking: The O2O Silver Bullet for Shopping Centers




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95%

5%

Card-linked Offers

Implementation of card-linking and loyalty programs reflect the realization that card-linking provides the only marketing tool that links a promotion or ad to an in-store sale. Additionally, the CardLinx Association works with members to institute common standards that ease the creation and operation of card-linked programs throughout the industries that use it.

78%

22%

Has your company used card-linked offers or loyalty marketing campaigns in the last 12 months?

Will your company continue to use card-linkedmarketing or loyalty campaigns in the next 12 months?

YesNo

No

Widespread Acceptance: Prevalence of Card-Linked Offers

What these two charts show is that card-linking programs are top-of-mind.

The results of the question on whether the respondent will launch or use a card-linking or loyalty program this year achieved a record for this survey. Since the inception of this survey, the results of this question consistently receive feedback of 95% or greater.

Yes




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Recent GrowthCard-linking and O2O ecosystems continued their strong growth. 81% of survey participants indicated that card-linking has grown at least 50% over the past year. This surpasses last year’s results of the same questions at 54%.

How much have CLOs grown in the last 12 months?

Card-Linking Growth ContinuesUnabated

The future of card-linking is directly related to the continued

consumer adoption of O2O technology. Increased consumer awareness and CLO programs demonstrate the growth in the card-linking ecosystem. Card-linking is a proven marketing tool to drive consumer usage and engagement. To facilitate continued growth, CardLinx earlier this year released an open source card-linking codebase, providing APIs to the leading payment networks.

More than 100%50% to 100%

30% to 50%

0% to 10%

10% to 30%

58%23%

7%

5%

7%




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Size of US Advertising

This survey also shows there is an enormous potential for growth and development in card-linked technology. The majority of participants indicated that the total advertising dollars to be targeted by card-linking could exceed $10 billion. Last year’s results clustered around the $10-$20 billion budget mark, while this year participants are more optimistic about the potential market and Over $50 billion received the most responses.

Potential advertising budget for card-linking

Sky’s the Limit: Advertising Budgets for Card-Linked Technology Could Exceed $10 Billion

Over $50 Billion

$30-$50 Billion

$10-$30 Billion

$1-$10 Billion18%

21%

43%

18%




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Type of Reward

Loyalty points are an important part of branding engagement and loyalty as well as an important tool for reaching out to millennial consumers who place a high value on “doing good.”

Getting a “% off” cash back coupon increased in popularity from last year by 21%. Card-linking has the benefit of being clearly understood by the consumer and retailer alike. Additionally, providing a cash back coupon does not require merchants or e-commerce companies to invest in or maintain a loyalty program, simplifying the process of incorporating card-linking into marketing strategies.

46%

24%

20%

5%6%

38%

26%

12%

4%

16%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

"% o�" cash back discount "Fixed dollar o�" cash backdiscount

Loyalty program points orbonus points

Buy one, get one free Other

2017 2016

What type of reward do consumers prefer?

Branding & Rewards: Loyalty Surges

Card-linking is becoming a crucial tool in creating and building

experiential branding engagement with consumers. This is shown in this year’s survey as the use of loyalty rewards increased the most out of all the reward types with a 66% increase from last year’s survey.




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Merchant Category

Restaurants still remain the category with the highest participation in card-linking. CardLinx attracts merchants from all industries. Within the CardLinx membership, there has been a diversification of merchant categories.

Which merchant category is best for card-linking?

More the Merrier: Merchants of All Types Embrace Card-Linking

Card-linking is maturing with new industries and companies using

card-linking for O2O commerce. Compared to the results from last year’s survey, this year’s participants are more confident in the variety of merchant types that can work with card-linking. Travel, Grocery and Clothing/Apparel categories all saw large increases. Merchants’ comfort with card-linking also increased as the category “Other” dramatically shrunk as card-linking has been applied to all types of merchants in 2016.

Department Stores

RestaurantsClothing/Apparel

Grocery

Travel(Hotel, Airline,Car Rental

16%

10%

22%

34%15%

3%Other




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Which department

The emergence of Loyalty departments demonstrates card-linking’s importance in the branding experience for merchants and as well as a more inclusive view of card-linking to touch upon all the different products through the loyalty program. The CardLinx Association often works with multiple departments within a company to provide a comprehensive strategic plan for their card-linking or O2O program.

54%

29%

8%

0%3%

6%

17%

Marketing

Loyalty

Other

e-Commerce

FinanceOther

What department is responsible for card-linking?

At the Top of Their Game: Marketing & Loyalty

Last year 69% of participants were in the marketing department while this year it was

54%. The difference was spread across other departments but most noticeably in Loyalty. Loyalty increased from 10% in last year’s survey to 29% in this year’s survey. E-commerce departments using card-linking doubled from 4% last year to 8% this year.




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CardLinx Association

The mission of the non-profit CardLinx Association is to increase interoperability and promote the growth of online-to-offline (O2O) commerce and card-linking. On behalf of its members, the Association fosters cross-industry collaboration, develops industry services and institutes common standards to minimize and eliminate friction. Founding members of the CardLinx Association include Microsoft, Mastercard, Discover, Facebook and First Data; other current members include Chevron, Hilton, FIS, MUFG, UBS, Sumitomo Mitsui Card Company and Rakuten/EBates. Visit our website for more information: www.cardlinx.org

Appendix




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18%

7%

20%

8%

11%

14%

17%

3% 1%

Industry Sector

With growth of card-linking and O2O, the industries using this technology have increased to encompass not only pioneering industries such as payments (20%) and digital advertising (18%) but also mobile tech/app developers (17%), retailers (7%) and loyalty program providers (11%). The diversity of the O2O industry has created even more innovation, especially with the Internet of Things (IoT).

Survey Participants’ Industry Sectors: Diversity in Growth

DigitalAdvertising

Retail/CPG

Payments

e-Commerce

Loyalty

Fintech

Mobile Tech/App

Bank/Card Issuer

Other




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Company size

CardLinx’s interactive forums and working groups foster collaboration among companies of all sizes and industries. These results reflect the CardLinx membership and is representative of the variety of companies within the card-linking and O2O ecosystems. Additionally, the CardLinx card-linking open source codebase released at the beginning of 2017 lowers the barrier of entry for new market entrants.

44%

19%

12%

26%

0% 10% 20% 30% 40% 50%

Startup/Small(Up to 99 employees)

(100-999 employees)

(1,000-4,999 employees)

Enterprise (Over 5,000 employees)

Percentage (%)

Large

Mid-Sized

Survey Participants’ Company Size: Maturing Ecosystem Entices New Entrants

card-linking and o2o industry survey2017 card-linking & o2o industry survey 6 the younger cousin...

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