Card Industry Overview

Overview Of Card Industry Technology To Loyalty
1

A Thought

Commerce has become a
technical issue. It is not only
about making a financial
transaction, it is about having
a relationship with the
consumer while they are
exchanging currency for goods
and services.

2
© 2001-2004 BusinessHive & Creative Commerce Group.
All rights reserved.

Insight

•  Kim Resch
–  Extensive Experience in Debit, Credit, and Smart
Cards, Mobile Commerce, Loyalty and Incentives.
–  Practical Experience in new product launches
including Amex Blue and smart Visa.
–  Specializes in project strategy, project management,
implementations, and training in the emerging areas of
commerce.
•  Dave Carrithers
–  20 years experience in semiconductor, chemicals,
consumer products, incentives, stored-value & debit
cards, etc.
–  Marketing, IT, Sales, NBD, operations
–  Focus on product, business & market development

3

A Little Laugh

4

Objectives Of Today

•  History of the card industry
•  Review the different types of cards and
payment types available in the market
•  Insight into how card products are
processed & the players
•  Review of the loyalty card industry
•  How & where the money is made in the
industry
•  Review of the credit card & airline loyalty
programs
•  Review of the smart card
•  Trends in the world of cards & payments
•  Opportunities 5

History Of Payment Cards

•  1914 - Western Union provided metal cards giving free, deferred-
payment privileges to preferred customers. These cards came to
be called "metal money.“

•  1924 - General Petroleum Corporation issued the first metal
money for gasoline and automotive services first to employees
and select customers and later to the general public.

•  Late 1930's - American Telephone and Telegraph (AT&T)
introduced the "Bell System Credit Card." Soon, railroads and
airlines introduced similar cards. Credit cards grew in popularity
until the beginning of World War II when "Regulation W" restricted
the use of such cards during the war and temporarily suppressed
the growth of this new payment alternative.

6


•  1946 - A New York banker developed a credit system called
Charge-It. When customers charged local retail purchases, the
merchant deposited the charges at Biggins Bank and the bank
reimbursed the merchant for the sale. The bank later collected
payment from the customer.
•  1950 - Mr. McNamara created Diners Club charge card.
•  1951 - Customers of New York's Franklin National Bank
submitted an application for a loan and were screened for credit.
Approved customers were given a card they could use to make
retail purchases. The merchant copied the customer information
from the card onto a sales slip, called the bank for approval of
transactions over a certain amount. The bank would credit the
merchant account for the loan minus a fee to cover the costs of
providing the loan.

7


•  1959 - Many banks were offering the option of revolving credit,
which allowed customers to make regular payments on the
balance owed rather than having to pay off the entire balance at
one time.

•  1965 - Bankcard associations began when Bank of America
formed licensing agreements with other banks. This enabled them
to issue BankAmericard and Interchange transactions among
participating banks.

•  1966 - Fourteen US banks formed Interlink, a new association
with the ability to exchange information on credit card
transactions.

8


•  1967 - Four California banks formed the Western States Bankcard
Association and introduced the MasterCharge program to
compete with the BankAmericard program.
•  1967 - Jürgen Dethloff invents the smart card computer.
•  1969 - As the bankcard industry grew, banks interested in issuing
cards became members of either BankAmericard or
MasterCharge. Their members shared card program costs,
making the bankcard program available to even small financial
institutions.
•  1970 - As credit card processing became more complicated,
outside service companies began to sell processing services to
VISA and MasterCard association members. This reduced the
cost of programs for Issuing Banks and Acquirers and increased
the size of the bankcard industry.
9


•  1970 / 1971 - MasterCharge and BankAmericard developed rules
and standardized procedures for handling the bankcard paper
flow in order to reduce fraud and misuse of cards. The two
associations also created international processing systems to
handle the exchange of money and information and established
an arbitration procedure to settle disputes between members.

•  1976 - A pre-paid phone card was introduced by the Italian
national phone company SIP. The introduction of the phone card
was brought about by an extreme shortage of coins in the country
which led to a rash of payphone thefts. The Italian phone card
used a magnetic stripe, similar to those found on credit cards, and
required the use of a payphone specially equipped with a
magnetic card reader.

10


•  1977 - BankAmericard became VISA.

•  1979 - MasterCharge changed its name to MasterCard.

•  1982 - Japan's Nippon Telephone and Telegraph introduced the
first Japanese pre-paid phone card to make calling more
convenient for the tens of thousands of daily subway riders in
Osaka and Tokyo. Like its European counterparts, the Japanese
pre-paid cards relied on a magnetic strip and specially equipped
telephones.

•  1993/1994 - Experimental card operating system at the University
of Karlsruhe. It was mainly intended to implement and compare a
family of public key crypto protocols worked on at the European
Institute of System Security. Hence the name of the card was
"ICEcard" (Ic card for Cryptographic Experiments).
11


•  1990 New York's RBOC, Nynex released the first pre-paid calling
card that used PIN authorization instead of the magnetic stripe.
Nynex's card permitted the cardholder to dial an 800 number and
enter his PIN to make long distance phone calls.

•  1993 – First bank debit card/ checking card issued.

•  1994 - MAOSCO and Keycorp create programmable smart cards.

•  1995 – Selective Use Debit Card Issued – Exclusively Yours Card.

•  1995 – First Stored-Value card issued – Your Choice Card.

•  1996 – Visa Cash Stored-Value Launched.

12

Card Industry Landscape

The Why!

The Players!

The Program Specifics!

The How!

13

Definition of Terms

•  Card Associations: Both VISA and MasterCard are not for-profit organizations
who both issue credit cards and set and maintain the rules for processing. They
are both run by board members who are mostly high-level executives from their
member banks.

•  Issuing and Acquiring Banks: An issuing bank is the original bank that issues
the card, such as a First USA Visa card. The acquiring bank is the bank set up
by the merchant to accept transaction processing for cards accepted.

•  Authorization Request and Response: An electronic request for authorization
sent to an Issuer by a merchant or Acquirer. The response can approve, decline
or route the transaction.

•  Authentication: A cryptographic process that validates the identity and integrity
of data used in smart cards.

•  Smart Card/Chip Card: A plastic card embedded with an integrated circuit, or
chip, that communicates information to a interface device. Chip cards offer
increased functionality through the combination of significant computing power
and data storage. Chip cards are capable of holding multiple applications and
sometimes are referred to as Multi-Ap Cards.
14

Definition of Terms

•  Online Authorization: A method of requesting an authorization through a data
communications network other than voice to an Issuer, an authorizing processor,
or stand-in processing.

•  Offline Authorization: A method of processing a transaction between the card
and terminal at the point of transaction without sending the transaction online to
the Issuer for authorization. Transactions are sent in batch format to the processing
systems.

•  Processor: A vendor acting as the agent to a bank that provides authorization,
clearing, or settlement services for merchants and banks.

•  Host Systems: A computer system used by an Issuer, Acquirer, Merchant, Client
or Vendor to perform in-house processing.

•  Interchange: The fees merchants pay to the card associations or companies on
the transactions, usually a % of the sale price.

15

Card Industry Landscape

The Psychology of a card program
Why!

The
Cardholder Banks Corporate Merchant Processor
Players
Issuing and Sponsor / POI
Acquiring

The Access Device Rewards Program Collateral
Programs (Card, Transponder, (Points, (Loyalty supplier, (setup, statements,
Specifics Terminals ….) coupons…) database, rules) printed materials)

The Technology
How!
(Systems, processing, hardware, firmware, Issuing)

16

Transaction Breakdown

Cash Check Card eCurrencies
*
In Store 60% 10% 30% 0%
Web 0% 0% 95% 5%

Catalog/
Phone
0% 30% 70% 0%

* Represents e-coins/e payment services, direct deposit

17

Card Facts

•  2000 - MasterCard's 20,000 member institutions had issued over
437 million branded cards world wide, 15.4 percent more than the
previous year. The number of cards issued in the US reached
235.1 million in 2000, 16 percent above the 1999 level.

•  MasterCard association generated $857 billion in gross dollar
volume (GDV), which includes both purchase activity and cash
transactions, representing a 21.5 percent increase on 1999. In the
fourth quarter of 2000, GDV rose 19 percent to $231 billion. In the
US, full year GDV registered its highest growth rate in six years
having risen 20.2 percent to $423 billion.

•  MasterCard has 21 million acceptance locations worldwide, a 12.7
percent increase on 2000.

•  1998 - Visa had issued 655 million cards, generating sales
volume of $ 1,4 trillion and was accessible at 488,585 ATMs.

18

Card Facts

Affinity Cards

•  MBNA Corp. The Wilmington, Delaware-based issuer issues
cards for 4,000 groups, ranging from virtually every college and
university in the US to the International Bridge Club. The
company's 2000 annual report says its average account balance
was USD $3,519, compared with the industry average of USD
$2,311. The average transaction value for MBNA customers was
USD $129, compared with the industry's USD $99.

•  First USA has more than 2,000 partnership programs, including
relationships with America Online Inc., Microsoft Corp., and
Yahoo! Inc.

•  According to association estimates, about 40 to 50 percent of
cards issued worldwide are multibranded (either a co- branded,
affinity, or loyalty card), a level that some say is the saturation
point for the market.

19

Card Facts

Affinity Cards

•  MasterCard has more than 12,000 co-branded and affinity
programs worldwide. Visa has about 9,000 multibranded
programs worldwide. About 20 percent of its US card base is co-
branded or affinity.

•  Auto and airlines cards each account for 23 percent of the co-
brand card market, followed by retail cards at 19 percent,
according to Visa and MasterCard figures.

20

How Money Is Made

•  MasterCard & Visa are not-for-profit associations, which support
member banks, which share a common network

•  American Express & Discover Card are, for-profit companies and
own their own networks

•  All card associations and companies charge an interchange fee to
the merchants that offer their cards
Ranges:
–  MasterCard & Visa 1.2% to 3%
–  AMEX 2.5% to 5%
–  Discover Card 1.2% to 4%

•  MC & Visa issuing banks get a cut of the interchange (between .
03% and 1% based on size of issuing volume)

•  Acquiring Banks get a cut of the interchange fee, plus sometimes
a processing fee (between .002% and 1%)

21

How Money Is Made

•  Processors charge a fee to handle transaction bundling and data
reporting, etc. Range between 1 cent to 25 cents per transaction

•  Card issuers charge consumers a fee to have a card, ranging
from $25 a year to $300 a year

•  Purchase cards charge yearly fees on reporting and filtering
support (range from $50,000 to $200,000 a year)

•  Cost per card, by card manufactures range from 10 cents to $5
dollars based on the type of card (i.e. smart card)

•  Breakage & float

22

Types Of Cards

•  Charge Cards
–  American Express
–  Retail Store/Private Label
•  Credit Cards
–  Visa/ MasterCard
•  Secured Credit Cards
•  Purchase/ Procurement Cards
•  Debit/ Check Cards
•  Stored-Value Cards
–  Gift Cards
–  Phone Cards
•  Membership & Other Cards
•  Smart Cards

23

Types Of Card - Charge

•  Charge Cards
–  American Express
–  Retail Store & Gas Cards
•  Interesting Points
–  No line of credit – must be paid off each month
–  Heavy penalties for late payment
–  In the past most retail stores offered one
–  Profitable for the stores
–  Single retailer version limited use
–  Service & extended warranty sales opportunities

24

Types Of Card – Credit Cards

•  Credit Cards
–  Visa/ MasterCard
–  Affinity Cards
–  Airline Cards
–  Limited in what can be done
–  Payment pretty straight forward
–  Requires credit check & approval
–  Market seems to be at saturation point
–  Operates on an open platform

25

Types Of Card - Secured

•  Secured Credit Cards
–  Target market is credit consumers
–  Requires a deposit of between $500 and $2,000
–  Monthly payment is required otherwise draw down on
deposit and high penalty
–  Requires high maintenance and yearly fees
–  Operates on an open platform with some level of
authorizations

26

Credit/Debit Online
Transaction Processing

-Merchant’s bank initiates
transaction -Routes to locations
determined by card ids for approval
-Merchant accepts card and processing
-Consumer’s bank approves
-Validates card by -Collects card ID/number, Merchant transaction, sends back to
signature check or PIN ID, Amount. merchant
-Processes transaction -Settlement will post to statement.

Request Request

Auth Auth

Settlement Settlement
Processor
Visa or MC systems

Legacy Hosts

27

Types Of Card - Purchase

•  Purchase/ Procurement Cards
–  Allows for filtering/selective use via SIC codes (i.e.
hotels, fuel, etc.)
–  Spending limits (daily, weekly, monthly, by category)
–  Intense reporting & tracking
–  Main target B2B & corporate travel
–  Operate on an open platform, with some level of
tabling/filtering

28

Purchase/Procurement Card

-Merchant accepts card -Merchant;s bank initiates
-Validates card by -Processes transaction
transaction
signature check or PIN -Approves or Declines
-Processes against SIC filter
-Processes transaction transaction
-Routes to appropriate locations
-Posts to statements on
settlement

Request
Request

Auth
Auth

Settlement
Settlement
Processor
Visa or MC
systems
SIC Filtering

29

Types Of Card – Debit/Check

•  Debit/ Check Cards
–  Started out as ATM only card
–  Requires a pin
–  Access to a bank/ checking account (continual deposits)
–  No credit line (instead an overdraft line)
–  Concern by retailers on fees
–  Runs on bank transaction networks (Interlink and Maestro)
–  Networks originally designed for banks to share information
–  Operates on an open and/or closed platform with security
–  Filtered (selective use) and open available

30

Debit Offline

-Merchant accepts card
-Collects batch data and formats -Processes transaction
-Validates card with PIN
clearing transaction -Posts to statements
-Processes transaction
-Approves or Declines transaction
-Routes to appropriate locations

Batch Request Request

Auth and Settlement Auth and Settlement

Processor
Visa or MC
systems
Legacy Hosts

31

Types Of Card – Stored Value

•  Stored-Value Cards
–  Gift Cards
–  Phone Cards
–  Mall Cards
–  Gas Cards
–  Open and Filtered (selective use) from one store, to a chain,
to a mall
–  Funds are pre-loaded on the card – most once spent are
disposable
–  Most are anonymous
–  Most operate on a closed platform

32

Stored Value

-Cards are preloaded with -Transaction processes like -Processes transaction
points. Debit -Posts to statements
-Merchant requests -Card is validated against
transaction stored value hosts or filtering
-Verifies Card

Request Request

Auth Auth

Processor
Visa or MC
systems
Legacy Hosts/
filters

33

Types Of Card - Other

•  Membership & Other Cards
–  Most likely no payment involved
–  Account &/or membership ID / number
–  Discounts / punch cards
–  Special access/ areas
–  Purchase or activity tracking
–  Magnetic strip &/or bar code
–  More about belonging to a club/group
–  Operates on a closed platform
–  Loyalty & frequency tracking

34

Membership Card

-Card is accepted
-Checked against internal
database
-Can be routed to third-party
database through processor.

Example:

Blockbuster

Internal

Database

rd

3 party

Database

Example:

Processor
Dining Ala Carte

35

Types Of Card – Smart

•  Smart Cards
–  Multi functional (debit, stored-value, credit)
–  Simple cards to very complex (based on chip type)
–  High security & fraud protection
–  Requires special reader
–  Contact & contactless technologies
–  Operates on closed and open platforms
–  Can have multiple currencies (i.e. cash, points, etc.)

36

Smart Card

-Card and Terminals authenticated with
cryptograms
-Validates card and
-Obtain PIN, if needed
transaction data
-Verifies static data on chip
-Routes to hosts
-Processes static programs offline
systems
-Sends transaction online
-Processes settlement
-Routes to any internal legacies
-Formats the crypto authentication -Posts to statements
-Verifies risk parameters on card
request
-Routes and initiate online
transactions.

Online Request Online Request

Auth Auth

Processor
Visa or MC
systems
Legacy Hosts

37

Smart Card Overview

Voucher Replacement
Automated Lodging
Mobile Commerce Processes

Logical & Physical Access • Smart Card: 101 Electronic Ticketing &
Automated Air Travel Processes
• The Market
• Smart Cards in Loyalty
POS / Merchant's
• Lessons Learned
Automated
Car Rental Processes

Corporate Security Target Marketing and
Expandable to other
Locations

Enhanced Customer Special Offers and
E-Purse Loyalty Programs
Information
38

History of Smart Cards

•  Smart Cards have been around since the early 70’s. The patent
was registered in 1974.
•  Commercialization started in the early 1980’s with phone cards.
•  In 1993, there were 300 million Smart Cards issued in the world.
(80% were phone cards)
•  In 1998, Amex Blue was introduced in US.
•  In 2000, vendors shipped 1.6 billion chip cards worldwide, of which
541 million were cards with microprocessor chips, up 36% from the
year before.
• In 2005, vendors will ship an estimated 2.4 billion of the higher-end
microprocessor cards, half of which will be subscriber identity
module cards for mobile phones

39

What is a Smart Card?

•  A smart card resembles a credit card in size and
shape, but inside it is completely different
•  A silicon chip beneath a contact plate
•  The silicon chip is a small computer with 8-64bit
microprocessor
•  It has the same processing speeds as old computers,
such as Tandy

40

Smart Card at a Glance!

Contact Plate
Applications

EMV Loyalty Wallet Misc.
Appl.

Operating System (MULTOS, JAVA, Windows)

Silicon

1234 5678 9012 3456
Joe Smith

41

Why Smart Cards?

•  Security and fraud reduction

•  Interactive

•  Storage Capacity

•  Dynamic downloading

•  Side Note: Outside the U.S., Smart Card use has
aggressively taken place because of two major
factors:
1.  Telecommunications is very poor & costly
2.  Majority of transactions are offline

42

Types of Smart Cards

•  Memory Card: No processing capability
•  Contact
•  Contactless (Proximity): Using Radio
Frequency
•  Combi-Card
•  Transponders or Key Fob

Operating Systems
• Java Card
• Multos
• Microsoft Windows for Smart Cards

43

Fraud and Security

•  Magnetic stripe technology remains in wide use in the U.S.
However, the data on the stripe can easily be read, written,
deleted or changed with off-the-shelf equipment.

•  To protect the consumer, businesses in the U.S. have invested
in extensive online mainframe-based computer networks for
verification and processing.

•  The microprocessor on the smart card is there for security. The
host computer and card reader actually "talk" to the
microprocessor. The microprocessor enforces access to the
data on the card.

44

Fraud and Security

•  Smart cards are protected with a public/private key
infrastructure:
–  Digital Signatures
–  Cryptography to perform:
•  Data Integrity
•  Authentication
•  Non-repudiation
•  Confidentiality

45

Why are Smart Cards Safer?

•  Built in interactive capabilities

•  Personalized cryptography

•  Tamper resistant, cannot be reproduced

•  Creates card present environment

•  Individual risk parameters

Note: Security directly contributes to price.

46

Standardization

•  EMV (Europay, MasterCard and Visa)
–  Card specifications
–  Terminal specificities
–  Application specifications

•  Cross-border concerns

•  How are they doing so far?

47

Common Uses of Smart Cards

The most common smart card applications are:
•  Credit cards
•  Electronic cash
•  Computer security systems
•  Wireless communication
•  Loyalty systems, like frequent flyer points
•  Banking
•  Satellite TV
•  Government identification

48

Common Applications

•  Loyalty: Multiple programs, tickets, points, coupons,
one-to-one.

•  Network Access: secure email, secure sign-on, web
access.

•  Payment: Secure transactions, multiple accounts.

•  Travel: reusable tickets, virtual ticketing, links to
payment applications and software, Automated
check-in, reduced fraud.

49

Smart Cards In Other Countries

•  Smart cards are much more popular in Europe than
in the U.S.

•  In Europe the health insurance and banking
industries use smart cards extensively. Every
German citizen has a smart card for health insurance.

•  Even though smart cards have been around in their
modern form for at least a decade, they are just
starting to take off in the U.S.

50

Where The Smart Card Market Is Headed!

•  Card issuers want chip card to reduce fraud.

•  Anticipates multi-aps will attract cardholders and transactions.

•  Chip Manufacturer and Hardware Suppliers are showing losses

•  Readers are not being adopted….even when free.

•  Keyboards are progressing.

•  Merchant migration is happening.

•  Gimmicks are more successful than functions (i.e.. Blue, Clear)

•  Internet transactions are “seeming” more secure.

51

The Current State of the Market

American Express

o  Launched “Blue” September of 1999. Now with over 2
million cards.
o  Applications: Secure Access, Wallet, Reader, BlueLoot
o  Rolling out to multiple countries, Business, Student.
o  Decommissioned Wallet
o  Focusing on palm computing and mobile.

52


Visa USA

o  Visa USA Launched “smart Visa” September 2000
o  Over 3 million cards with Providian, First USA and Fleet.
o  Applications: Payment, Access, Loyalty, Reader.
o  Launched Target POS (Providian made first transaction).
o  Hypercom, Vital and National City teaming up for POS
o  Pushing Loyalty as driver for merchant

53


MasterCard

o  Citibank planned September 2001 launch of 4m
cards
o  Applications: e-cash, loyalty, e-ticketing
o  Strong alliances, yet Multos-based.

54

Loyalty and Smart Cards

•  Multi-ap functions are prime for loyalty, yet difficult to please the
whole market.
•  Closed environments are good examples and ripe for loyalty.
•  Will supply more security.
•  Market will not advance without merchant.
•  Have not proved usable functions are more superior than mag
stripe.
•  What the industry is looking for is a “gift card on steroids.”

55

Opportunities for Loyalty

•  Relationship management on the card
•  Multiple earning and redeeming
•  Individualized information and preferences
•  Points and programs held locally on card
•  Info storage capacity
•  Links to databases

56

Obstacles In Adoption

•  Infrastructure
•  Ease and convenience with Mag. Stripe
•  Cost of card and conversion
•  Retailer ROI
•  Cardholder confidentiality
•  Standardization

57

Lessons Learned

•  Version and program control
•  Application segregation
•  Transaction processing changes
•  Card/program expiration dates
•  Replacement cards
•  Branding
•  Servicing
•  Information management / multiple databases

58

A Quick Review

Frequent Flyer & Card Programs

59


•  Prior to 1980, FFPs Not Possible
–  Airline Industry Regulation
–  Lack of Infrastructure
•  Dominated by Unsophisticated Offerings
–  Merchandise & Coupon Based
–  S&H Greenstamps
–  Raleigh Cigarette Coupons
•  1981 Regulatory & Market Changes Give Birth To FFP
–  American invents frequent flyer miles
–  Loyalty Becomes Impossible Without A Planned Program
–  Hertz joins and subsequently drops, citing the high costs.
Later rejoins after dramatically losing market share without a
FFP. Today Hertz belongs to 20 FFPs
–  After in-house Frequent-Stay Programs, hotels conclude that
the greatest marketing benefits still come from the FFPs

60


•  "We didn't want an FFP. But it came to my attention that
FFPs were siphoning business travel away from us. We did it
defensively, and I think if we had not done that we would
have been terribly disadvantaged."
- Herb Kelleher, President, Southwest Airlines

•  First 20 Years Of FFP 9.77 Trillion Miles Accumulated
- Source: InsideFlyer Magazine 2001

•  1985 - Banks Team Up With Airlines

•  Co-branded Cards Wildly Successful
–  Average spend up to 10x higher
–  Active account rate up to 80 percent or higher
–  Attrition and acquisition costs decline

•  150,000 members in 1981 to 200,000,000 members in 2001

61


•  By 1991: All major airlines and banks established exclusive
relationships and Hundreds of credit card issuers locked out

•  1994: “Virtual Airline” is Born – Generic Mile Programs

•  Miles by a different name:
–  Single Branded Miles vs. Co-branded Miles
–  Generic vs. Branded Points
–  Non-Restrictive Points – Any Airline In The World

•  How Generic Points Work:
–  Sold to Over 125 of the largest US Banks
–  Consumer Acceptance: fees $25 to $75
–  Spend Ranges: $8,000 to $22,500 a year
–  Officially Sponsored by MasterCard
–  Amex plays “Follow the Leader”
–  $200 Billion + Spent on Enrolled Cards
–  No need to Co-brand with an airline partner
62

Top Banks With Unrestricted Programs:

•  Capital One •  First USA
•  GE Capital •  Fleet
•  Travelers Bank •  Morgan Stanley Dean
•  Direct Merchants Witter
•  Bank One •  Chase Bank
•  Wells Fargo •  Charter One
•  Household Bank •  MBNA
•  Town North •  HSBC
•  Citibank •  Comerica
•  Household Credit •  Merrill Lynch

63

Loyalty Learning’s

•  71% of consumers if FFP said they wouldn’t trade
their frequent flyer benefits for lower airfares.
Source: Frequent Flier Magazine

•  The proven addition of miles can drive repeat
purchases and maximize customer lifetime value.
Source: Hambrecht & Quist

•  Consumers charge about $3,200 a year on a typical
credit card – add miles and they spend more than
$18,000 a year.
Source: Bank Rate Monitor

64

Universal Mile + Network + Card

The Network as a Catalyst for Increased Spend and Activation

Purchases on XYZ BANK PLUS all other
card at partner $1,325 $ card purchases
retail locations outside the
partner network
Miles Earned Through Partners: 2,125
Miles from Card: 1,325 +
Total Earning that Month: 3,450 +

300 Miles 100 Miles 250 Miles 300 Miles 800 Miles 375 Miles

$ 300 $ 100 $250 $ 300 $ 300 $ 75

+ + + + +

65
Grocery © Retail
Gas & Oil Electronics
2001-2004 BusinessHive & Creative Commerce Group.
Trip TeleCom
(online & offline)

Universal Mile + Network + Card

Incremental monthly revenue volume increases 400%+ & revenues increase $100 Million + a year.
Increase in Monthly Charge Volume (in $Millions)

$500
Sample Card Issuer with 200,000 cards

$400 EXAMPLE* Monthly Annual
Revenue Revenue
Increase Increase

Increased $ 4.0 M $ 48.0 M
$300 Spend
Incremental monthly
Increased $ 2.7 M $ 32.8 M
charge volume goes
Activation
from $72M to $314.2M
$200 —an increase of
Increased $ 1.9 M $22.3 M
430% Acquisition

$100 TOTAL $ 8.6M $ 103.1M

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$6

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,0

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$1

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Average Monthly Spend 66
* Revenue figure based on 2.9% of gross charge volume in interchange and miscellaneous fees, plus 60% revolving balances at 13.9% annual interest.

Card & Mile Issues To Keep In Mind

•  Attainability Of The Program Member: Limited
Earnings Capability = Short-Term Loyalty & Interest

•  Single Partner, Stand Alone Programs: Even Top
Customers Can’t Make For A Successful Program –
It Requires A Network

•  Just Because They Carry Your Card Doesn’t Mean
You’ve Captured Their Heart: "The research shows
clearly that the existence of a loyalty card scheme is
not associated with a degree of loyalty in shopping
habits." -Source: Customer Loyalty Today

67

Trends – Relationship Convergence

Wireless Data
Availability

Security Loyalty

68

Thank You For Your Time

Kim Resch, Founder and President
Decision making around technical issues is expensive.
Think-tank atmospheres are vital, yet difficult and
expensive to implement in corporate America. Efficient
implementation is the key to success. It is not an
environment for a learning ground. Let us help with:
www.CreativeCommerceGroup.com

• Resources for the Emerging Commerce Industry
Creative Commerce Group, Inc. • Smart Card and Magnetic Stripe Solutions
is dedicated to the support of their • Hardware Equipment and Implementation
client’s needs and solutions.
Each client offers unique and • Stored Value Card Applications
special challenges, whether in
technology, in concept
• Loyalty Strategy Specialist
development, in speed to market • Project Management Formula “Methodlogically”
or hardware to make it happen.
But through disciplined project
management, we have helped
clients' launch new products 636-861-9850 or Kim@ccg-i.net
successfully, time-and-time again.

69

Thank You For Your Time

David Carrithers, Chief Bee Keeper
Providing consulting services for business individuals looking for honest
and straightforward counseling, coaching & implementation of business
solutions that improve profit performance and loyalty with employees,
channels and customers. www.BusinessHive.com

Generating Results Through:
Targeted Individualized Coaching Program
• Improved Customer & Employee Loyalty
• Enhanced Product, Market & Business Development Results
•  Profitable Brainstorming & Product Creation
• Faster & More Accurate Product & Business Launch Management
• Unbiased Incentive Program Assessment & Support
• Dynamic Organizational Development

707-484-3620 or e-mail David@BusinessHive.com
70

Card Industry Overview

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