Analyzing Credit Card Data Is the Future of Digital Marketing

For a long time, I thought Cardlytics (CDLX) managers could do no wrong. They put the company at the epicenter of financial technology.

But I didn’t see a global health pandemic coming. No one did.

Everything fell apart, and even promising companies with solid long-term outlooks took massive hits.

Retail spending collapsed as consumers stayed home under the threat of COVID-19. The company reshuffled managers. Shares are down 53% year-to-date and down 67% last month alone.

But I believe that shareholders are likely to get a reprieve.

I’ve spoken about Cardlytics before. Simply put, it is a growth company. While the business of analyzing credit card data might seem like a lost cause in an era of shuttered stores and fearful consumers, it isn’t.

After all, this crisis will pass.

The transition from cash to digital payments is not going away any time soon. The opportunity to buy dominant fintech platforms at a discount is rare. And it won’t last for long.

Cardlytics is the perfect middleman. It partners with banks to gain access to their customers’ anonymized debit, credit and bill payment information. The company then works with marketers to tailor rewards programs based on the data.

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Imagine if advertisers could target consumers by sifting through their credit card statement to see what they bought. It would be an unfair advantage.

Providing those insights and making it all seamless is Cardlytics’s business in a nutshell.

Personalized reward offers show up when bank customers sign in to their online accounts. If they like what they see, they select it and that’s it. The next time they visit the selected store or restaurant, they automatically receive the discount if they use the bank credit or debit card for payment. There are no coupons to print and no passes to show. The savings just magically appear.

The best part is everyone wins.

Bank customers get more relevant rewards programs. Marketers get more qualified prospects and a digital platform to measure returns. Banks get more loyal customers and a new stream of fees from Cardlytics for playing match maker. As the platform gatekeeper, Cardlytics gets its cut too. In other words, it’s perfect.

The dynamism of the business model saw partners eagers to join. The company signed JPMorgan Chase (JPM) and Wells Fargo (WFC) during the past two years. After announcing preliminary fourth-quarter financial results in January, managers claimed Cardlytics had access to half of all credit card transaction data in the United States. The company began building enough scale to support 200-million monthly active users.

Cardlytics reported in March that actual fourth-quarter revenues surged to $69.3 million, a gain of 45% year-over-year. Profits were $3.4 million versus a loss of $11.6 million. Unfortunately, due to the economic slowdown, managers also reduced guidance by $6 million, to $46 million for the first quarter.

Lynne Laube said the company is building out its platform slowly to make sure that partners and advertisers are comfortable. The full platform is expected to be externalized by late 2020. Laube, who is a co-founder, will become the new chief executive on May 15. She will be replacing fellow co-founder Scott Grimes, who moves to executive chairman of the board.

The bottom line is this a great business that is incredibly well-positioned for future growth in data analytics. Growth investors should consider recent pullbacks as opportunities.

Best wishes,

Jon D. Markman

About the Editor

Jon D. Markman is winner of the prestigious Gerald Loeb Award for outstanding financial journalism and the Society of Professional Journalists' Sigma Delta Chi award. He was also on Los Angeles Times staffs that won Pulitzer Prizes for coverage of the 1992 L.A. riots and the 1994 Northridge earthquake. He invented Microsoft’s StockScouter, the world’s first online app for analyzing and picking stocks.

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