Why one startup deems a pandemic to be a good time to offer point of sale rewards

With the coronavirus pandemic forcing far more e-commerce transactions — and thus, more spending on cards instead of cash — loyalty and rewards are vital to creating lasting consumer habits.

One startup is betting that by introducing consumers to card-linked offers online, it can encourage the same behavior once those shoppers return to spending at the physical point of sale.

Enter Figg, a new card-linked offer company that has come about through St. Paul, Minn.-based Augeo's purchase of long-time partner Empry, a San Diego-based card-linking platform for national brands and digital publishers. Augeo will stay in business as a channel-engagement tech provider, with Figg as its complementary company.

Considering it's hard to find a payment card or a merchant client that doesn't have some sort of offers program linked to transactions, Figg enters a landscape of opportunities for those seeking similar benefits for customers.

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After all, the most common card-linked programs like BankAmeriDeals, Amex Offers, Chase Offers, Mastercard Easy Savings, Visa Savings Edge, Shell Fuel Rewards, and many other travel and airline products would not operate without technology that connected a deal to a POS terminal or e-commerce checkout page, and then to a back office to adjust accounts and data to reflect the savings.

Valor Siren Ventures, a food and retail technology investor, saw the need to make that complex process easier for issuers and merchants, and supported the Empyr acquisition in order to expand card-linking power through Figg.

"We are grateful for the opportunity to partner with Augeo in creating Figg," said Jon Shulkin, Valor partner and VSV fund manager. "Figg creates an extensive network to build an innovative retail technology platform that drives value for all stakeholders."

Figg will position itself as a company helping issuers and merchants spark rewards or deals programs both online or at the physical point of sale once businesses reopen in the wake of coronavirus.

The company will have more than 60 million linked cards and will handle $300 billion in transaction volume right out of the starting gates from previous work Augeo and Empyr completed.

Augeo and Figg executives like the idea of being a stronger presence on a payments technology landscape in which merchants and card issuers continue to take advantage of the growing digital age to initiate different interactions with consumers — even if it is simply targeted emails or social media pitches promoting a specific deal on a specific card.

"We work in partnership with issuers, processors and social platform publishers, all of which have their cardholders participate in our platform," said David Kristal, Augeo's CEO. "The source of our consumers comes from them."

Cardholders enroll in the programs through their bank's or social media platform's mobile app. After paying full price for a product that is part of a card-linked offer, Figg will collect data related to the merchant's offer on that product and return those savings to the cardholder after billing and collecting payment from the retailer on the discounted amount.

"It is heavy-duty fintech with the number of cards and transaction volume in our network," Kristal said. "Collecting and matching data from advertisers and then sending money back to participating cardholders is very complex."

A key aspect of Figg's process is that merchants pay a fee to Figg only when a transaction is completed. Figg carries on previous work of Augeo and Empyr in a market in which companies like Cardlytics have established solid models for card-linked deals.

Cardlytics is behind some of the card-linked offer programs at major banks like Wells Fargo, JPMorgan Chase and Bank of America, while also using its platform to offer national deals and knock down some barriers in which banks wrestled each other for exclusivity rights.

"When you look at credit cards and what they offer over time, the issuers are going to need to figure out where rewards fit in the space because they can be a drain on profits," said Brian Riley, director of card services for Mercator Advisory Group. "This is where something like this" — the creation of Figg — "makes sense because there is room in this space to generate interest, especially with the increase in e-commerce during the virus."

If Figg is able to narrow down its offerings to create a more local feel, it could help issuers benefit with their programs, Riley said.

Going after the "buy local" deals is what Austin, Texas-based Buzz Points had in mind with its business model over the past several years. The company was also trying to get footing with its ability to track data for merchants, merging a Buzz Points reward with a fitness tracking incentive on wearable products or in other programs.

"The takeaway is that the market can be receptive to this now and the timing is good," Riley added. "We will see issuers doing some re-engineering of some cards to attract more attention."

During its earnings call last week, American Express CEO Stephen Squeri reiterated a stance the card brand has had for several months now — that the company intends to restructure many of its products' rewards and offerings to keep them up to date with current trends and economic pressures.

Augeo did not disclose terms of the Empyr acquisition, but Kristal said the discussions began last fall and planners had set a March date.

"The pandemic hit, so we paused and assessed," Kristal added. "We decided that the primary value and strategy that brought us together in the first place hadn't really changed."