Tess Vigeland: Anyone who uses Google or Facebook at this point knows that privacy is an iffy thing. But all those companies can really do is make an educated guess about your interests. And then advertise to you. You know who knows exactly what your purchasing interests are? Credit cards and banks. And they’re realizing what a cash cow that just might be for them. Marketplace’s Stacey Vanek Smith joins us now with the details. Hi Stacey.
Stacey Vanek Smith: Hi Tess.
Vigeland: So how much do these guys really know about me? How does this work?
Vanek Smith: Well credit cards and banks know a lot about us. They know what stores we shop at, how much we spend, where we buy things, when we buy things — and they get new information almost instantly. So if you swipe your card at the store, the credit card company knows within seconds where you are and what you’re buying.
Vigeland: Then I guess the key question here is what are they doing with this information? I always assumed that that was eyes only.
Vanek Smith: Well, they’re selling that information actually.
Vigeland: Oh boy.
Vanek Smith: Banks and credit card companies are offering that information to merchants. The merchants use it to figure out who they want to target with ads. Credit card companies like Visa are doing this and there are a whole bunch of start-ups that are cropping up that kind of work like matchmakers for banks and merchants. They have software that they give banks to help them analyze the data that they have on us and they offer that information up to merchants.
Vigeland: And I thought there were privacy issues with Facebook!
Vanek Smith: Well the privacy issues, they are very sensitive about that. So the banks don’t actually ever release the data. The banks just get the software to analyze it. The merchants never see your data, neither do the matchmaker companies. But the banks will offer them — you know, this is customer X who shops at Sears a lot.
Vigeland: But then how does that work for you and for me? If they’re not saying exactly who I am, how is it tailored to fit me?
Vanek Smith: Well OK, it’s sort of like Groupon, except tailored to you. So Tess, I happen to know that you’re a big foodie. So let’s say that you spend $100 a month at Williams-Sonoma.
Vigeland: No! I host a personal finance show. What are you talking about?
Vanek Smith: I know. Well Sur La Table, big Williams-Sonoma competitor, might go to your bank and say, “Listen, we want to know who is regularly spending $100 a month at Williams-Sonoma and we want to offer them a 50 percent off coupon for anything in our store.” And then you would get an offer from your bank. You would see that coupon either when you checked that bank statement online or you might get an e-mail from your bank, or even a text message. Visa recently teamed up with the Gap to create these kinds of offers. And here’s Visa’s global head of products, Jim McCarthy, explaining how it works.
Jim McCarthy: We know when they’re shopping at, say like a Starbucks at 8 a.m. based on seeing that transaction, and knowing that a consumer’s within, let’s say, a mile or two within a Gap store. We would actually push a message to your cell phone based on your location that would say, Gap is willing to give you, let’s say, 50 percent off a sweater if you’re willing to come in within the next two hours.
The merchant only pays if and when someone uses a coupon, so they love it. The banks get a cut of that fee, so they’re very happy. And the idea is that customers would opt into the program and they’d be happy to get offers they might be able to use.
Vigeland: Well, I suppose the question here is: Does this work? Are people going to opt into this?
Vanek Smith: Well, funny you should ask. I actually handed my bank data over to a company that does this.
Vanek Smith: I did it for you, Tess.
Vigeland: All in the service of reporting, right?
Vanek Smith: I know. If they clean me out, I’m hoping I can come to you for a loan. The company is called Free Money, they were very careful and respectful of my data. It’s rolling out its service this summer. It’s teaming up with a couple of the biggest banks and a bunch of merchants. And I asked them to use their technology to go through my credit card purchases and make me some offers. And here is Mike Linton of Free Money.
Mike Linton: So the first gift would be $15 at Foot Locker.
Vigeland: Woohoo! I know you’re a runner, so I suppose that’s appropriate.
Vanek Smith: This is true, but that is not all. There were a few more offers that they made me.
Mike Linton: So the next gift would be $20 at Lord & Taylor, followed by $5 at Quiznos, followed by $20 at Pottery Barn.
Vigeland: So you are hungry and then you are going to go shopping — that’s what they figured out about you.
Vanek Smith: Yes, I can buy running shoes and run to Quiznos.
Vigeland: Well, I guess it’s the creep-out factor versus getting a discount, and people can make their own decision about that. Marketplace’s Stacey Vanek Smith, thanks so much.
Vanek Smith: Thank you, Tess.
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