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    CNN: The banks’ billion-dollar idea

    CNN takes a look at banks’ use of consumers’ financial data — such as what people buy and where they shop — to make money from retailers.

    Many of the nation’s leading banks are using information about their customers’ shopping habits — how much they spend, where they shop, what they buy — to make money.

    Based on that data, retailers are offering targeted discounts via the banks through text messages, email and online bank statements.

    The banks don’t actually hand over your data to retailers. Instead, retailers describe what type of customer they’d like to target and the bank then sends the deal to customers who fit the profile. When the customer cashes in on the deal, the bank gets paid a commission. […]

    Merchants pay banks an average fee of 10% to 15% of the purchase price of a product each time a customer uses a discount that’s generated from the bank’s data, according to Cardlytics, an intermediary that works with both banks and retailers.

    Typically, the bank takes a 25% cut of that fee and pays the rest to an intermediary, like Cardlytics. So if a customer buys a $1,000 couch, the merchant pays a fee of up to $150 to the bank and the bank walks away with $37.50. […]

    And, of course, there’s also the issue of privacy. Aite Group estimates that more than 460 million cardholders will be enrolled in the programs by 2015. (In most of cases, consumers are automatically enrolled in the merchant incentive programs, but they do have the right to opt out — as required by bank regulations.)

    The banks and intermediary companies — such as Cardlytics and Cartera Commerce — claim that personally identifying information like your name, bank account number and Social Security number are never disclosed to the merchant.

    Instead, banks can only access an anonymous numeric code assigned to each customer. […]

    Merchants don’t see your individual shopping information either, the banks and intermediary companies say.

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