New Loyalty Programs Crop Up That Will Give You Cash Back Directly in Your Bank Account

New forms of loyalty programs are cropping up to eliminate the need to carry a plastic card for every grocery store, coffee shop and department store you go to. The debate is not over whether it will change, but which model will dominate in the future.

At least two companies FreeMonee and BillShrink are presenting today at Finovate, a two-day event in San Francisco, which shows off some of the biggest trends in payments.

The idea piggybacks on concepts that have been in existence for years. Today, credit card companies reward customers with points when they visit certain hotels or rental car companies, so why can’t that be applied on a much wider basis? Why can’t your credit card company track how much you’ve spent at particular retailers, and calculate what rewards you may qualify for?

Additionally, credit card companies and banks see this as an opportunity to create a new revenue stream. By tracking spending patterns–presumably with privacy settings in place–the companies would be able to work with merchants and brands to deliver relevant offers.

“The thing is that a number of financial institutions have started to realize that they have tons of data on where consumers shop, how they shop and how much they spend. Up until now, they haven’t done anything with it and they aren’t monetizing it,” said Gwenn Bézard, research director at Aite Group, which tracks the banking industry.

That’s all about to change.

This morning at Finovate, FreeMonee is unveiling the rewards program it has been working on for the past year and a half. The company has raised $11 million in venture capital from Redpoint Ventures, Sutter Hill Ventures, Opus Capital Ventures, Pinnacle Ventures and Contrarian Group. It has built a platform that enables merchants to give cash gifts directly to individual credit and debit cardholders in order to entice them to go to a store and make a purchase.

The company is being started in part by former Visa SVP Jim Taschetta and Mike Linton, former CMO of eBay and Best Buy.

Linton said that merchants will be able to target users by a number of factors, such as geography, type of spend, type of store or other demographics. They can then send consumers gifts of cash directly to their card. The idea is a little similar to the Groupon space. Consumers would get about a week to spend the cash, which comes with very few if any conditions. They get to use the cash to buy whatever they want, and they aren’t obligated to spend more–although the retailer would hope they do.

Linton, who speaks from experience from his years at Best Buy, said you are willing to pay a lot to get customers in the store, through circulars and other advertising. He argues this isn’t a loyalty program because the goal isn’t to make current customers even happier. It’s designed to get new people in the door.

BillShrink also presented at Finovate today. The company, which has been about helping users save money on their various bills, including phone and cable, is unveiling a new program for banks that could replace loyalty programs.

“You don’t have to sign up for a new card, you don’t have to share any information with the merchant,” Schwark Satyavolu, BillShrink’s co-founder and CEO, said.

BillShrink’s program is integrated into your online banking account. From within the stream of purchases a consumer has made, it can insert offers that you may be eligible for. For example, you have already spent $100 at Toys R Us, but if you spend $50 more, you will be able to save 10 percent on your next purchase.

“The Groupon model has made everyone more aware of the consumer demand for incentives,” Satyavolu said. “But the Groupon model is untargeted….This gives consumers the ability to see what they care about, and gives merchants much better reach and banks the ability to cultivate existing relationships.”

BillShrink and FreeMonee are not the only two companies that are meddling in this space. Others include Clovr, Offermatic and Cardlytics.


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