BOSTON-As banks and credit unions explore ways to create new revenue streams, a new Aite Group report indicates the daily deals market could generate over $1.4 billion in revenue for FIs on more than 300 million transactions by 2017.
Despite some of the luster wearing off daily deals, exemplified by Groupon's recent struggles, Aite Group Senior Analyst and the study's author, Ron Shevlin, explained financial institutions have an opportunity to reshape daily deals and make them much more relevant to consumers.
"The Groupons and LivingSocials tend to bombard consumers with offers that are not relevant to them because they are not targeted," said Shevlin. "But financial institutions have good data around consumers' spending habits and can work with merchants to personalize the offers."
Shevlin added that consumers in his study, titled "Daily Deals: The Opportunity for Banks and Credit Unions," indicated they were very interested in receiving daily deals from their FI. "Consumers told us they would like to receive the offers via channels through which they normally connect to their bank or credit union, such as online banking."
Slight Change To Model
To work, though, the daily deal business model needs to slightly change, insisted Shevlin, reducing what merchants pay into the deal to 10% from 50%, about the standard value paid into a deal by merchants today. "Many large merchants we talked to had no interest in doing daily deals at 50% on a regular basis because they are giving away too much margin. FIs take 10% and it's still almost a billion-and-a-half dollars, and I think that is conservative."
Shevlin emphasized that banks and credit unions jumping on daily deals won't solve their profitability problems, but will add another revenue stream.
"I want to also emphasize that the $1.4 billion is an estimate of the market potential here, it is not a prediction of where things will actually be in 2017. To get there, financial institutions will have to step up to the plate and start offering these daily deals."
For info: www.aitegroup.com. Subscribers can read the related story, "Daily Deals? Time To Capitalize on Value Sitting in Data" at www.cujournal.com.