Card-Linking and O2O Industry Survey 2018 - The CardLinx Association www.cardlinx.org From Online-to-Offline
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Card-Linking
and O2O Industry
www.cardlinx.org
Survey 2018
The CardLinx Association
www.cardlinx.org
From Online-to-OfflineTable of Contents
EXECUTIVE SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
KEY FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Growth Tipping Point: Majority of Companies See CLO Transactions
Grow More Than 100%. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Restaurants, Grocery and Department Stores Lead Online-to-Offline
Marketing Adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
What’s Next? Mobile Wallets With Embedded Coupons and Loyalty . . . . . . . . . . 4
Consumers Increasingly Prefer “Cash Back” versus Loyalty Points Rewards. . . . 5
SURVEY RESULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Card-Linking Transaction Growth Over the Past 12 Months . . . . . . . . . . . . . . . . . 6
Card-Linking Advertising Budget Projection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
What type of reward do consumers prefer for card-linking? . . . . . . . . . . . . . . . . . 7
Which merchant category is the best fit for card-linking?. . . . . . . . . . . . . . . . . . . . 7
Poised for Consumer Adoption Worldwide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
What feature is most important in the growth of
online-to-offline commerce? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
APPENDIX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
About the CardLinx Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Copyright 2018 All Rights Reserved info@cardlinx.org 2 For more information visit www.cardlinx.orgExecutive Summary
Card-linking refers to the technology enabling the linking of a consumer’s online digital app to
a payment card or mobile wallet used for offline/in-store purchases. Card-linking is one of the
most widely used online-to-offline technologies (“O2O”). Examples include Bank of America’s
Bank Amerideals and Groupon+. This annual research study analyzes global trends in card-
linking and O2O commerce by surveying the world’s largest merchants, technology companies,
card issuers, payment networks and loyalty companies. CardLinx Association members and
survey participants include Microsoft, Rakuten, Samsung Card, Bank of America, Sumitomo
Mitsui Card, Mitsubishi UFJ Nicos, Hilton, AEON, MasterCard, JCB among others.
The 2018 study reveals the accelerating growth of online-to-offline commerce with a majority
of participants reporting over 100% annual growth in card-linked transactions. In addition,
companies report an increased use of O2O card-linking in the travel industry and for cross-
border offers. Mobile wallets are poised as the next large scale technology for O2O digital
coupons and digital loyalty programs.
2018 is also the year that artificial intelligence (AI) applications in card-linking and O2O have
finally achieved some significant scale in certain areas. Key new AI commerce areas include:
personalized ads and offer targeting, card origination, online-to-offline conversion tracking, fraud
detection and new customer services like biometric checkouts and cashier-less registers.
According to a recent McKinsey Global Institute analysis1, four of the top five industries that
derive the most value from deploying AI are also the ones most active in the O2O ecosystem:
travel, retail, automotive and high tech. Cross-border commerce and travel are a frequent focus
in O2O commerce as payment networks, retailers and card-linking technology companies use AI
to provide hyper-personalized offers to drive in-store purchases.
The line between traditional brick-and-mortar retailers and e-commerce companies is
continuing to blur as all retailers use AI, cloud computing and big data analysis for competitive
market advantage. This past year there has been an explosion in the development of AI for
cars ranging from real-time, in-car payments, like the recent Mastercard-SAP partnership
announcement to continued refinement of self-driving cars and corporate drone fleets. For
high tech titans, the pursuit of complete marketing attribution continues unabated, including
Google’s release of their card-linking API.
The card-linking and O2O ecosystem continues to grow and mature into an industry with
limitless opportunities as technological advances like payment-enabled devices, artificial
intelligence and deep learning become more common. Increased consumer data through recent
data portability regulations and consumer preference for opt-in advertising and commerce
platforms are driving the use of machine learning and AI in all aspects of retail.
Further developments of card-linking and O2O will deliver increasingly better offers and retail
experiences.
1. Notes from the AI frontier: Applications and value of deep learning, by Michael Chui, James Manyika, Mehdi Miremadi, Nicolaus
Henke, Rita Chung, Pieter Nel, and Sankalp Malhotra; https://www.mckinsey.com/featured-insights/artificial-intelligence/notes-
from-the-ai-frontier-applications-and-value-of-deep-learning?cid=other-eml-nsl-mgi-mck-oth-1805&hlkid=2d16314dbeb34a7da1
813e2d3f023dff&hctky=9936479&hdpid=5767ad8b-bf52-4971-8322-d74e8537c106; retrieved May 20, 2018.
Copyright 2018 All Rights Reserved info@cardlinx.org 3 For more information visit www.cardlinx.orgKey Findings
GROWTH TIPPING POINT: MAJORITY OF COMPANIES SEE CLO
TRANSACTIONS GROW MORE THAN 100%
For the first time in the history of the survey, the majority of respondents had their card-linked
transactions grow more than 100% in the last year. 62% of respondents across North America,
Asia and Europe experienced at least a doubling in their card-linked offer (CLO) transactions
over the past year. The growth in 2018 also signals how CLO has gone mainstream with very
significant scale. For example in the United States, Japan and the United Kingdom, many of
the top five banks including Bank of America, Sumitomo Mitsui and Barclays have significantly
expanded their online-to-offline digital marketing platforms.
In addition, the proliferation of non-bank “app based” card-linking marketing programs, from
companies including Groupon, Yelp and Uber, drove growth in new online-to-offline channels.
Card-linking’s ability to reach consumers across multiple digital channels is increasingly
enticing chief marketing officers (CMOs) of large merchants to shift digital marketing budget to
this technology.
RESTAURANTS, GROCERY AND DEPARTMENT STORES LEAD
ONLINE-TO-OFFLINE MARKETING ADOPTION
For 2018, the top three merchant categories for card-linking are 1. Restaurants at 30%, 2.
Grocery Stores at 19%, and 3. Department Stores at 17%. These merchant categories benefit
the most from online-to-offline promotions like card-linking because they have a high purchase
frequency and typically require offline fulfillment through a physical store.
One new merchant category made it to the top 4 with significant growth compared to 2017:
Travel Merchants. This growth has been driven by airlines and hotels. These companies are
seeing an increasing proportion of their revenues derived from ancillary services like baggage
fees, room services and cross promotions for non-competitive merchants. These ancillary
services are well suited to new online-to-offline marketing channels like CLO that are more data
driven than traditional marketing channels.
WHAT’S NEXT? MOBILE WALLETS WITH EMBEDDED COUPONS
AND LOYALTY
In 2017, the most promising commerce technology was AI. In 2018, it is “back to the future”
as more than 40% of respondents in both Asia and Europe selected “Mobile Payments with
coupons and loyalty” as the most promising new commerce technology. Asian markets
including China first reached mass consumer scale with mobile wallet offers/coupons on Alipay
and WeChat Pay. These offerings are now poised for broad scale adoption in Europe, North
America, and soon, other markets including Latin America, Africa and Australia/ New Zealand.
Copyright 2018 All Rights Reserved info@cardlinx.org 4 For more information visit www.cardlinx.orgCONSUMERS INCREASINGLY PREFER “CASH BACK” VERSUS
LOYALTY POINTS REWARDS
A cash back discount has always been the highest preference for consumers. However loyalty
points offers have grown in popularity for the prior two years. 2018 reversed that trend
with “Loyalty Points” rewards declining in popularity. Loyalty points offers declined from the
top preference at 16% this year compared to 20% last year. This shift signals an increasing
“cash price” sensitivity for consumers despite a robust consumer spending environment on a
global basis.
Copyright 2018 All Rights Reserved info@cardlinx.org 5 For more information visit www.cardlinx.orgSurvey Results
CARD-LINKING TRANSACTION GROWTH OVER THE PAST 12 MONTHS
How much have CLOs grown in the last 12 months?
10% More than 100%
50% to 100%
13%
30% to 50%
5% 10% to 30%
62% 0% to 10%
10%
72% of survey participants responded that the transaction volume for their card-linking programs
has increased more than 50% over the past year. A majority, 62%, saw transactions grow by
more than 100%. This is a first in the history of the CardLinx survey. This result demonstrates the
“mainstreaming” of CLOs in retail marketing. Card-linking’s ability to reach consumers wherever
they are makes this advertising channel a “must have” for chief marketing officers.
CARD-LINKING ADVERTISING BUDGET PROJECTION
2017 2018
Potential Advertising Budget for Card-Linking Potential Advertising Budget for Card-Linking
Over $50 billion $30 to $50 billion Over $50 billion $30 to $50 billion
$10 to $30 billion $1 to $10 billion $10 to $30 billion $1 to $10 billion
According to the Interactive Advertising Bureau2 digital advertising hit $85 billion in 2017.
According to CardLinx survey participants, card-linking has the potential to capture half of
the total global digital advertising market. Card-linking is one of the most broadly used opt-in
marketing channels. As opt-in digital platforms become more dominant, card-linking will also
grow more rapidly.
2. http://adage.com/article/digital/iab-record-breaking-year-digital-ad-revenue/311712/
Copyright 2018 All Rights Reserved info@cardlinx.org 6 For more information visit www.cardlinx.orgWHAT TYPE OF REWARD DO CONSUMERS PREFER FOR CARD-LINKING?
What Reward Type Do Consumers Prefer?
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
“% off” cash back “Fixed doller off” Loyalty program points Buy one, Other
discount cash back discount or bonus points get one free
2018 2017 2016
Consumers continue to prefer cash back discounts when using card-linked offers. This year
survey participants preferred a fixed “Dollar Off” offer to a greater extent. This signals an
increased price sensitivity in 2018 despite strong consumer spending globally.
Loyalty points offers had grown in popularity for the prior two years. 2018 reversed that trend
“Loyalty Points” rewards declining in popularity. As with other questions in the survey, there is a
flattening and diversification of survey responses over time as more industries and retailers use
more varied reward options across card-linking programs.
WHICH MERCHANT CATEGORY IS THE BEST FIT FOR CARD-LINKING?
Which Merchant Category Is Best for Card-LInking?
Other
Travel
Grocery
Clothing/Apparel
Restaurants
Department Stores
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
2016 2017 2018
Legacy card-linking programs are associated with the Restaurant category, thus this category’s
traditional dominance. For 2018, the top three merchant categories for card-linking are 1.
restaurants at 30%, 2. grocery stores at 19%, and 3. department stores at 17%. The top
categories are merchant categories that have high purchase frequency and typically require
offline fulfillment through a physical store.
Copyright 2018 All Rights Reserved info@cardlinx.org 7 For more information visit www.cardlinx.orgOver the past two years, the travel category has surged to from 2% in 2016 to 11% in 2018.
The results of this year’s survey indicates a continued diversification of merchants that use
card-linking.
POISED FOR CONSUMER ADOPTION WORLDWIDE
Europe Asia
Cashier-less Stores
13% 19% 21%
28% Biometric Payments
8%
4%
Card-linking programs
12% embedded in mobile
payment options
10% Peer-to-Peer Payments
41% 44%
Artificial Intelligence
Card-linking is uniquely poised to take off in Europe and Asia as the implementation of GDPR
and Open Banking are leading to greater use of opt-in advertising technologies like card-linking.
Regulators in North America and Asia may follow Europe’s lead by implementing new rules to
drive data portability and enhanced consumer control of data.
In 2018, it is “back to the future” as more than 40% of respondents in both Asia and Europe
selected “Mobile Payments with coupons and loyalty” as the most promising new commerce
technology. Asian markets including China first reached mass consumer scale with mobile wallet
offers/coupons on Alipay and WeChat Pay. These offerings are now poised for broad scale
adoption in Europe, North America, and soon, other markets including Latin America, Africa and
Australia/New Zealand.
41% of European respondents and 44% of survey respondents in Asia said that card-linking
was the next O2O technology to gain widespread consumer adoption. In Europe, new data
monetization models are replacing Facebook and Google “freemium” models as the focus shifts to
opt in models where consumers have greater control of their data and advertising. In Asia, there is
a focus on developing technologies to bring the online shopping experience in-store. The second
most popular response for survey respondents in Asia is cashier-less stores. Companies such as
Alibaba are already beta testing these technologies in China.
Copyright 2018 All Rights Reserved info@cardlinx.org 8 For more information visit www.cardlinx.orgWHAT FEATURE IS MOST IMPORTANT IN THE GROWTH OF
ONLINE-TO-OFFLINE COMMERCE?
Technologies Poised for O2O Growth
60%
50%
40%
30%
20%
10%
0%
a . Industry b . Big data/cloud c . Consumer d . Retail e. Artifical
standards data analysis usage/adoption branding and Intelligence
marketing
2018
We asked “What feature is most important in the growth of online-to-offline commerce?” and 50%
of the survey participants indicated “consumer adoption” was the most important followed by “big
data” and “cloud analysis”. With GDPR and Open Banking initiatives worldwide, consumers are
demanding more control of their data leading to new data monetization models that are replacing
Facebook and Google “freemium” models.
Card-linking has always been an opt-in model, and this transparent usage of consumer data with
consent is part of card-linking’s appeal and continued growth in the US and internationally. All
these components create a virtuous cycle where better targeting, loyalty benefits and personalized
offers through AI and cloud computing along with the consumer opt-in model, has spurred more
consumer usage.
Copyright 2018 All Rights Reserved info@cardlinx.org 9 For more information visit www.cardlinx.orgAppendix
ABOUT THE CARDLINX ASSOCIATION
CardLinx Association is the premier, multi-industry trade association focused on promoting
online-to-offline commerce and card-linking worldwide. On behalf of its members, the
association fosters cross-industry collaboration, develops industry services, organizes executive-
level innovation forums and institutes common standards to minimize and eliminate friction for
purchases. Founding members of the CardLinx Association include Microsoft, Mastercard, Bank
of America, TransUnion and First Data; other current members include: Hilton, FIS, MUFG, UBS,
Sumitomo Mitsui Card Company and Rakuten. Membership in CardLinx Association is open to
financial institutions, publishers, advertisers, merchants, merchant acquirers, payment networks
and fintech companies. Companies interested in joining the association should visit:
www.cardlinx.org
Copyright 2018 All Rights Reserved info@cardlinx.org 10 For more information visit www.cardlinx.orgYou can also read
