How advertisers are following your purchase pattern...

Imagine signing in to your online-banking account and finding promotions linked to your transactions. Underneath a transaction for a restaurant, there's an offer from that eatery for $10 cash back when you spend a minimum of $20. And underneath a purchase at an apparel chain, a rival offers 15% cash back for shopping at its store or website.

REWARDS: Cardlytics offers take the form of consumer rewards.

It may seem intrusive, but Cardlytics, the company behind the program, claims that advertisers, consumers and financial institutions are fast embracing this new advertising model. So far, major marketers such as McDonald's, Macy's and Staples have signed on with Cardlytics, while half a dozen financial institutions have implemented the service and are touting it as a rewards program for their customers.

In all, Cardlytics, a privately held company that officially launched the program last November, says it has run more than 100 marketing campaigns reaching nearly half a million customers. By the end of the summer, the company expects to have 50 to 70 financial institutions on board, reaching some 10 million customers by the end of the year.

"It's a whole new channel," said Hans Theisen, chief revenue officer. "It eliminates so much waste. I don't care whether it's digital, TV or print. You're not guessing about who your audience is. I can guarantee you're reaching a fast-food customer or apparel shopper or moviegoer."

Mr. Theisen can guarantee that because Cardlytics is privy to transaction data: the name of the merchant, date of the purchase, how much was spent and the customer's ZIP code. But it does not have access to personally identifiable data like customer names, account numbers or home addresses, which are managed by participating banks. Because of that, he downplays privacy concerns, noting that Cardlytics goes through "lots and lots" of regulatory steps in order to work with financial institutions. Customer information remains behind the bank's firewall.

Privacy "is always the first question we get, and it's the easiest to answer," he said. "We don't get privacy information. We don't cookie customers and follow them around the web. It's less infringing upon a customer's privacy than many behavioral-targeting companies."

Opt-out
Though customers have the ability to opt out of the program, opt-out rates across Cardlytics program have been less than 5%, said Mr. Theisen, about two-thirds less than the 12% to 15% opt-out rate the company modeled for.

Here's how it works: When a bank customer signs in to view his or her online statement they can see various reward offers in three places, alongside transactions, in a column on the transaction page or on a rewards-summary page. To activate the offer, they must click, and once the reward is activated, it is automatically converted when the consumer uses his or her debit or credit card at that merchant and the transaction is processed by their bank. No special software or interaction is necessary on the part of merchants. And because the program uses transaction data from debit cards and credit cards, the ads on the online statement are applicable to transactions made online or offline.

Cardlytics operates under a pay-for-performance model, so it gets paid only when consumers redeem an offer. Payment to Cardlytics varies based on client category and the type of offer, though advertisers receive a projection. Cardlytics declined to offer specifics on advertiser fees and said it could not legally share details on its financial arrangements with banks.

Aaron McPherson, an analyst focusing on payments and security technology at IDC Financial Insights, said that, from a security perspective, the Cardlytics program is not any riskier than other card-based rewards programs. Banks, he added, have always had the ability to target consumers based on the transactions they're making, they just haven't done it.

"Are consumers going to be freaked out by this? It's one of the reasons why banks have not historically been willing to go there," he said. "Banks have to be careful to position this as an opportunity."