The future of coupon systems and how banks can capitalize on them

Somak Das,

Business Consultant

Published: August 31, 2019

In the coming years, the survival of banks will majorly depend on innovation, customer retention, and the ability to rapidly evolve. And, customer stickiness will hugely depend on banks‚ ability to transform as a one-stop-shop to meet their customer's financial needs. Therefore, banks must foray into newer territories for business opportunities and growth.

Coupon business scenario

Alluring customers with discount offers, coupons, and promotional deals is a widespread tactic practiced am by merchants across the globe. Even banks strive to provide relevant deals on flight/hotel bookings, e-commerce shopping, credit card transactions, food delivery/dining out, movie tickets, bill payments, recharge, and more. The coupon business is dominated by free-standing inserts (FSI) and digital coupons. Digital coupons are rapidly capturing the market thanks to nearly 3.989 billion smartphone users (as of 2019). A few recent findings indicate:

  • 86% of consumers admit coupons prompt them to try new products
  • 61% of all consumers use their phones to help them save money on purchases
  • 84% of shoppers create lists based on available coupons
  • 37% buy more things that they normally would

At present, merchants mostly use global platforms (nearbuy, Groupon, RetailMeNot), segment-specific platforms (Zomato, Finery, thredUP), and e-commerce platforms (Amazon, eBay, Alibaba, Flipkart) to distribute coupon to their target audience. However, the utilization of distributed coupon is still far from optimal. The main reasons for low absorptions are:

  • Unavailability of a real-time dynamic coupon recommendation facility
  • Customers do not get the right coupons at the right time
  • Location constraints

Future developments

The future coupon business models must incorporate features that effectively aid consumers in the buying process. A few recommendations include:

  • Geolocation

Today, smartphones come with a pre-installed GPS, which can be utilized for coupon recommendation. Customers should be able to choose the radius they want to search to locate any merchant with coupon offers. Alternatively, coupons can get auto-populated based upon the customer's current location.

  • Day of the week and time of the day

Coupons should be recommended based on time of the day and days of the week to increase the chances of redemption. For instance, a movie coupon may not receive enough interest during weekdays like it would on the weekend.

  • Personalization

A coupon is personalized when it takes into consideration the background of the consumer. The parameters can be age, demographics, psychographics, education, income, preferred brands, and spending patterns, among other things.

What do banks gain out of it?

Banks revenue from the current coupon business comes from the transaction fees charged to the merchants. Coupon platforms charge as high as 50% of the coupon value from merchants. Banks may tap the same revenue-sharing opportunity to increase revenue as well as to enhance customer stickiness.

The personalization process in the coupon system requires in-depth information of the individuals to create a custom-made list of recommendations. Any well-established bank owns most of the demographic, financial, and transactional data of their large client base. The same data can be analyzed by technologies such as artificial intelligence, machine learning, and blockchain to effectively recommend custom made coupons.

Here lies the opportunity for the banks to develop a coupon platform which will analyze and deliver custom made coupons to its customer. Instead of being a payment facilitator, banks should reposition themselves at the center of the coupon distribution universe as a customized coupon provider. Apart from the monetary profit, banks significant gain will be from customer stickiness, more wallet share & recurring customer visits on its platform. Also, benefited customers can help banks in getting new leads and hence, expand their customer base.

What merchants gain?

Merchants need coupons to mobilize sales and clear their inventory. A custom-made coupon recommendation system will help in two ways:

  • Targeted reach - With targeted reach, banks can experience a profitable growth in sales due to the increased redemption rate. In addition, this may reduce the customer acquisition cost.
  • Movement of inventory - Clearance of existing stock is vital for any business. Proper usage of coupons can help in a significant reduction of old stocks.

What's in it for the buyers?

  • Personalized recommendations improve the customer experience and reduce fatigue of the buyer since only relevant coupons are presented.
  • Users will save time as they won't have to browse multiple sources for their desired coupon.


Traditional banking experience is not enough to retain customer base anymore as all other banks are delivering the same. Personalization is the new benchmark of customer service, which determines customers loyalty and retention factor for a bank. A new age coupon platform can help banks open alternative revenue sources and maintain a profitable growth by bridging the gaps between merchants and customers, leading to a win-win situation for all.


Somak Das

Business Consultant

Somak Das is a business consultant with Virtusa Corporation. As a banking domain expert, Somak facilitates business development, account management, and strategic planning for banking clients in Singapore. He actively contributes in challenging digital transformation projects and brainstorms innovative ideas to design new software and services for Virtusa's global clients.

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