The document discusses how location-based offers (LBOs) present an opportunity for U.S. retail banks. As mobile device usage increases and location technologies advance, LBOs are growing across industries like retail and healthcare. However, retailers lack customer spending data to make offers truly relevant. Banks have this valuable customer data from transaction histories. By partnering with retailers and using location data, banks can create highly customized LBOs that drive customer loyalty and sales for both banks and retailers. Success requires strategies that leverage mobile technologies, location data, and analytics to deliver the right offers at the right time based on a customer's unique "Code Halo" of digital data.

1. • Cognizant Reports
cognizant reports | october 2015
U.S. Consumer Banks and
the Potential of Location-Based Offers
Technology, consumer behavior and a variety of business and industry
imperatives are prompting banks to adopt location-based services.

2. cognizant reports 2
Executive Summary
The increasing use of mobile devices like
smartphones and tablets, plus advances in
location-aware technologies, are driving the
adoption of location-based offers1
(LBOs) across
consumer-facing industries, including the retail
and healthcare sectors. However, progress has
been stymied by a lack of data on consumer
spending patterns.
The timing couldn’t be better for U. S. retail banks,
which must grapple with more competition,
less profitability and unpredictable customers.
Consumer banking products are now considered
commodities, and no longer a source of
differentiation. To counter this situation, banks
can become a vital resource for retailers looking to
develop relevant location-based offers that attract
more consumers and strengthen their loyalty.
Yet success in the LBO space requires banks to
employ business strategies and technologies
(mobile and location-aware) that combine the
power of location-based campaigns with Code
Halo™ thinking — making and applying meaning
from the digital data that surrounds people,
processes, organizations and devices.
Location, Location, Location
LBO mechanisms are able to confirm the
whereabouts of a mobile user and send offers
that are relevant to the recipient based on his or
her location and the time of the offer. Over the
past two years, LBOs have gained significant
traction in many industries, especially retail and
healthcare. In fact, the location-based services
market is expected to grow nearly five-fold — from
$8.12 billion in 2014 to $39.87 billion by 2019.2
For the consumer banking industry, LBOs are
increasingly important due to several factors:
• The proliferation of mobile devices, the
emergence of location-based technology
and the growing use of analytics. Through-
out the U.S., consumers continue to increase
their use of smartphones and other mobile
devices. For example, approximately 74% of
mobile phone users in the U.S. own or use
a smartphone, and 52% own tablets.3
This
trend, plus advancements in GPS systems and
the use of predictive analytics and advanced
algorithms, are contributing to the growth of
location-based services.
Customers are also more responsive to LBOs.
According to a Cisco survey,4
46% of consum-
ers are interested in having personalized offers
delivered to their mobile devices, while 38%
are open to receiving personalized promotions
related to products and services.
• Diminishing customer loyalty. Today’s cus-
tomers need more compelling reasons to
remain loyal and sign up for more products —
something banks have known for some time.
The competition between banking and non-
banking institutions like PayPal, Square, Wal-
Mart, etc., has shifted the balance of power in
the customer’s favor. Consumers are now more
likely to switch banks if their requirements
are not met. According to a recent EY survey,
approximately 50% of bank customers either
opened or closed accounts and services over
a 12-month period (2014).5
They expect more
from their providers and have more options
to choose from. They are also better informed
about various banking services, given that
so much information is now available online.
Many also want products tailored to what they
perceive as their unique needs.
• The need to foster differentiation. Over
the years, consumer banking products have
become commodities. Most products and ser-
vices, such as payments, credit cards, loans
and mortgages are very similar as far as
terms and benefits go. In contrast, customers’
requirements are becoming more diverse —
placing more pressure on banks to distinguish
their products in a highly competitive, low-
profit environment. As a result, institutions
have had to shift their focus away from provid-
ing "business as usual" products to tailoring
offerings to individual customers’ demands.
• The growth of digital platforms. Digital chan-
nels offer another, newer avenue for engaging
customers. For instance, mobile technologies
combined with real-time behavioral analytics
can help banks identify the best "moments of
opportunity" to offer assistance or make an
offer, which could be as simple as sending a
text message (SMS) or e-mail.

3. cognizant reports 3
more when they use credit cards instead of cash.
For instance, McDonalds saw customers’ average
purchase increase from $4.50 to $7.00 after the
company started to accept credit cards.7
Retail’s Challenge is Banking’s Opportunity
Retailers were among the first to offer location-
based services. M&S, Starbucks, L’Oréal and
other known brands ask customers to register by
providing information such as their age, gender
and interests. For example, Starbucks customers
receive a text message extending them a discount
on Starbucks purchases when they enter a geo-
fenced area. However, many retailers have been
hamstrung in these efforts because they lack
access to data concerning consumers’ spending
behavior — preventing them from sending
contextually relevant offers. Most retailers focus
on location-based information, and only send
targeted messages when customers are near
the retailer’s stores. Consumers do not consider
these offers personalized or relevant. They may
even find them intrusive and block them.8
Retailers are thus turning to smart engagement
techniques, including using multiple sources of
information to create contextually meaningful
offers to customers. This is where banks can step
in to help retailers deepen customer relationships
and generate additional revenue. Banks are
well positioned to improve the relevance of
offerings, since they possess detailed insight
into customers’ transaction history and
spending behavior. Using this granular data —
from demographics to psychographics — banks
can create highly customized offers that steer
The Benefits of LBOs
Uncovering Cross-Selling Opportunities
In addition to allowing banks to offer regular
promotions, LBOs present the opportunity to
strengthen consumer relationships through
cross-selling or up-selling. For instance, a bank
could automatically extend a customer’s credit
limit or cover an overdraft when the customer’s
account balance cannot cover a purchase, or
the customer has exceeded the limit on their
bank credit card. With the ability to inform them
of an offer to increase their credit limit for a low
fee in real time, banks can significantly enhance
the customer experience, with the potential to
draw more revenue from these services. Banks
can also utilize location technologies, data
collection tools and analytics to deliver a more
complete and accurate view of offers that best
address customers’ needs and interests at a
particular point in time.
How Location-Based Offers Drive
Customer Loyalty
In a study conducted by Pew Research Center,
approximately 46% of customers reacted
positively to location-based offers.6
Yet in order
to deliver compelling offers and coupons to their
customers, banks must collaborate with retail
establishments to help ensure a win/win for all
parties — the bank, its customers and the retail
brand. Banks can capitalize on this opportunity
by linking retail offers to payment options, such
as card-linked promotions or mobile wallets. They
can also influence card usage by giving additional
discounts to customers who use the bank’s
cards. Research shows that customers spend
Quick Take
Leading Banks Taking the LBO Leap
• America First Credit Union Bank: Customers receive relevant offers on their mobile devices based
on their transaction history, and redeem them at designated merchants using their America First
debit, credit or prepaid cards.
• Visa: To receive offers, customers must register their mobile and Visa card numbers. When a customer
makes a payment using their Visa card, the transaction is immediately processed and analyzed to
determine if it matches the criteria for a discount to be transmitted. If so, the offer is sent to the
customer's phone via a text message.
• American Express has partnered with several retailers to offer real-time promotions based on a
customer’s location and credit-card activity.

4. cognizant reports 4
customers to the "right" merchandise or service
at the right moment and at the right place.
This can increase customer loyalty and improve
business performance for both retailers and
banks — affording the latter the opportunity
to promote more personalized products and
services in the right context.
The Challenges of Implementing LBOs
Among the obstacles banks face when executing
location-based offers, the two most significant are:
• Assuring the security and privacy of end-
user data. The growth of location-based offers
has raised concerns about customer privacy.
This is understandable, given the potential for
misusing customer-related information. Recent
data breaches in the retail industry9
have
customers worried about the security of their
financial and personal data. The success of
LBOs will largely depend on the effectiveness
of companies' security controls, such as
tokenization and end-to-end encryption.
• Legacy systems. Legacy systems can be
costly and cumbersome, making it difficult to
capture, process and analyze large datasets in
real time — a must for LBO environments, which
depend on precisely timed opportunities.
Getting LBOs Right
To effectively execute location-based offers,
banks should employ a combination of business
and technology tools, supported by a carefully
crafted strategy. Following are some actions they
can take to manage and profit from location-
based campaigns:
Goal-Setting
The basic aim of an LBO is to enhance and extend
banking products and services through more
channels, and take advantage of the opportunity
to offer them to customers based on location/
context. With this in mind, banks should break
down their objectives, such as the specific
products they want to highlight through LBOs,
then prioritize them. For example, banks can send
vehicle loan offers to a customer’s smartphone
when the customer is actually at a dealership.
Location Planning
The next step is to establish geographical
boundaries. While setting up a geofence10
— a
virtual perimeter for an actual geographic area —
it is best to identify locations that are relevant
to the offer or service, such as stores, schools,
neighborhoods or event venues, then tag each
area for easy identification. Banks can then
decide where and when to engage customers
(for example, should an offer be delivered while
a customer is in a retail store or when they are
near the store?
Campaign Planning
As stated earlier, in order to truly benefit
from LBOs banks must deliver appealing and
contextually relevant offers that entice customers
to patronize a nearby business. This requires
institutions to deepen their understanding of
customer traffic and shopping behavior by
analyzing data about a customer’s location,
buying patterns and personal preferences.
Timing is everything. To drive traffic to a store,
the scheduling of messages and offers must be
right. With this in mind, banks should develop
an outreach message strategy that helps ensure
that customers will react positively to the bank’s
LBO initiatives.
Banks can direct mobile-based offers to outreach
locations through push or pull strategies, or apply
a mix of the two.
• Push messaging involves sending promotional
offers or coupons (retailers, eateries, etc.)
directly to customers’ mobile devices or apps
to create awareness and trigger action at the
point of purchase. For example, a customer
pulling up to a restaurant chain’s drive-thru
window at 7:PM would receive a discount
coupon for the restaurant at that moment via
their smartphone.
• Pull messaging focuses on getting customers
to request individual promotional offers or
coupons during the purchase process. In these
cases, the customer would be "pulled" to log
in to the mobile app to check out available
offers at a nearby shopping mall.
Given that these campaign models are based on
larger geofences, banks can adopt two messaging
approaches:
• Proximity-based messaging entails sending
offers or deals based on a customer’s location
and previous buying patterns.

5. cognizant reports 5
• Time-based messaging involves sending
offers or deals based on the customer's
location, the time of day, and the customer’s
previous buying patterns. For instance,
a customer’s presence in Eat Street at 8:PM
(dinner time) would trigger messages related
to offers available in nearby restaurants.
Evaluating Results
The final step in an LBO initiative is to measure
the success of the campaign. In most cases,
results are calculated against the retailer’s
objectives, such as driving traffic to stores or
increasing sales. If required, offers can be refined
or redesigned to improve results.
Technology Enablers
To further ensure the effectiveness of location-
based offers, banks can leverage two key
technologies:11
• Location-aware technology. The primary
location-aware technologies in use today are
GPS, Wi-Fi and Bluetooth smart devices.12
GPS
works very well when customers are outdoors,
but is not as accurate when they are inside.
In these cases, technologies such as Wi-Fi
networks or Bluetooth can be used to locate a
customer. This type of hybrid approach works
best.
• Mobile devices (mobile phones, smartphones,
tablets, wearables, personal navigation
devices, etc.). Banks can now track location
information via a mobile network or mobile
device.13
Network-based methods utilize the
service provider's network infrastructure to
identify the location of the mobile device.
These approaches use location-aware systems
that require the installation of preloaded
applications. Users must register or log in,

6. cognizant reports 6
and report the device location using GPS or
Wi-Fi positioning technologies.14
Mobile-based,
location-aware systems provide an accurate
geographic position of the user at any given
moment.
Code Halo Thinking
With digitization, every action an individual
takes generates data that is unique and specific
to that person. We call this a Code Halo.15
Customers’ Code Halos hold valuable information
collected from a wide array of sources, such as
transactions, geographic location, shopping
activities and product choices. Code Halos are
dynamic, and extremely useful for gaining insight
into customers’ preferences and habits. Using
advanced analytics and algorithms, banks can
analyze the data from customers’ Code Halos,
then use it to develop relevant, contextual offers
and engage customers in new and lasting ways.
Consider this scenario: As a customer approaches
or passes a Starbucks outlet, he receives a real-
time offer on his smartphone. The coupon is for
25% off the price of not just any beverage, but a
Starbucks Mocha Cookie Crumble Frappuccino —
his favorite — based on his purchasing history and
preferences.16
Core elements of a Code Halo Solution
• Big Data. An IDC Digital Universe study pre-
dicts that the amount of digital data created
per year will reach 35 zettabytes by 2020.17
Meanwhile, it is becoming increasingly impera-
tive for banks to analyze this data to stay com-
petitive. Conventional relational database and
data-warehousing technologies are not capable
of storing and processing such large data sets
in real time. Big data requires highly sophisti-
cated technologies to store and process large
volumes of data without any time lapse.
• Predictive analytics and algorithms. Algo-
rithms are real-time, rules-based programs
developed around customer Code Halos and
mobile-device interactions. It is actionable
intelligence — formulated and programmed to
deliver the right offers at the right moment,
with a higher success rate (in terms of conver-
sion rates, wallet share and overall sales). Ana-
lytics is the "brain" of Code Halos. Together,
location analytics and advanced predictive
analytics help identify patterns of events
that shape certain opportunities and predict
when they are likely to happen again. Loca-
tion analytics estimates the number of visits,
the amount of time spent, and the frequency
of trips to retail stores based on mobile loca-
tion technology. Predictive analytics provides
information on the movement and purchase
patterns of individuals while they are at a
retail site, based on the person’s Code Halos
(purchase history, demographics, past behav-
ior and preferences).18
Looking Forward
Advances in mobile and location technologies,
customers’ ever-expanding use of mobile devices,
and the ability to gather and analyze volumes of
customer-related data are unlocking new oppor-
tunities for U.S. retail banks — enabling them to
become an indispensable resource for retailers
looking to enrich their customer relationships.
This is especially compelling for an industry now
largely associated with commoditized products
and services.
In the age of digital business, banks can apply
the vast amount of customer data they collect to
help retail businesses develop relevant, location-
based offers that entice consumers and fortify
their loyalty. Yet success in location-based initia-
tives will require banks to develop strategies and
adopt technologies that are in step with location-
based campaigns, and derive more meaning from
the digital data that surrounds people, processes,
organizations and devices.
Note: Code Halo™ is a trademark of Cognizant
Technology Solutions.

7. cognizant reports 7
Footnotes
1
Location-based offers use a mobile device’s geolocation to alert the user about an offer from a nearby
business.
2
“Location Based Services (LBS) Market – Worldwide Forecasts and Analysis (2014 - 2019),”
Markets and Markets, April 2014.
http://www.marketsandmarkets.com/Market-Reports/location-based-service-market-96994431.html.
3
Teens and Technology 2013. Pew Research Center’s Internet American Life Project, June, 2013.
http://www.pewinternet.org/files/old-media/Files/Reports/2013/PIP_TeensandTechnology2013.pdf.
4
“Catch and Keep Digital Shoppers: How To Deliver Retail Their Way,” Cisco, 2013.
http://www.cisco.com/web/about/ac79/docs/retail/Catch-and-Keep-the-Digital-Shopper_PoV.pdf.
5
“Winning Through Customer Experience.” EY Global Consumer Banking Survey, 2014.
http://www.ey.com/Publication/vwLUAssets/EY_-_Global_Consumer_Banking_Survey_2014/$FILE/
EY-Global-Consumer-Banking-Survey-2014.pdf/.
6
Pew Internet American Life Project, 2012.
http://www.pewinternet.org/2012/05/11/three-quarters-of-smartphone-owners-use-location-based-
services/.
7
“Retailers and Banks: Finding the Path to the Ultimate Alliance,” Kurt Salmon, 2013.
http://www.kurtsalmon.com/uploads/Kurt%20Salmon-Retailers%20and%20Banks%20Path%20
to%20Alliance_130408VFSP.pdf.
8
“Contextual Personalization – The next frontier in customer engagement,” Webtrends, 2014.
https://cdn.webtrends.com/files/resources/Whitepaper-ContextualPersonalization-Webtrends.pdf.
9
“Data Breach Investigations Report,” Verizon, 2015.
http://www.verizonenterprise.com/DBIR/2015/.
10
A geo-fence could be dynamically generated, as in a radius around a store or point location.
11
“Location-Based Services — Components.”
http://geoawesomeness.com/knowledge-base/location-based-services/location-based-services-com-
ponents/.
12
“Location Based Marketing,” Havas Media, December, 2013.
http://www.havasmedia.com/documents_library/insights/location-based-marketing.pdf.
13
“Locating an Opportunity: The Rise of Cellular Networks as a Method for Location-Based Services,”
Syniverse Technologies, LLC, 2013.
http://www.syniverse.com/files/Rise_of_Cellular_Networks_as_LBS.pdf.
14
“How Location Data Is Being Collected And Transforming The Mobile Industry,” BI Intelligence, 2013.
http://www.businessinsider.com/how-mobile-location-data-is-collected-2013-7#ixzz3aCZpkp6F.
15
“The Future of Retail is ‘Here’ and ‘Now’,” Cognizant Technology Solutions, January 2015.
http://www.cognizant.com/InsightsWhitepapers/the-future-of-retail-is-here-and-now-codex1053.pdf.
16
https://blog.kissmetrics.com/location-based-marketing/.
17
http://searchstorage.techtarget.com/news/1511342/Digital-data-created-in-2020-forecasted-at-
35-zettabytes-cloud-computing-will-manage-data-growth.
18
“Contextual Mobility Transforming the Future of Business,” Tibco, 2012.
http://www.tibco.com/assets/bltd609c99878e1fa1f/brochure-contextual-mobility.pdf.

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Credits
Author and Analyst
Krishnakanth Sutrave, Research Manager, Cognizant Research Center
Subject Matter Experts
Swarraj Kulkarni, Senior Director, Technology, Cognizant Banking and Financial Services
Vasant Rao, Senior Director, Analytics, Cognizant Emerging Business Accelerator
Swaminathan Aiyer, Senior Manager, Cognizant Emerging Business Accelerator
Neelu Singh, Manager Analytics, Cognizant Emerging Business Accelerator
Design
Harleen Bhatia, Research Manager
Mohammed Salman, Designer