Card Industry Overview

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Overview Of Card Industry

Technology To Loyalty

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

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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.

A Thought


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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


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A Little Laugh


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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


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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.


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• 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.


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• 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.


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• 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.


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• 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.


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• 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).


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• 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.


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Card Industry Landscape

The Why!

The Players!

The Program Specifics!

The How!


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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.


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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.


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Card Industry Landscape

The Why!

The Players

The ProgramsSpecifics

The How!

Psychology of a card program

Cardholder Corporate Sponsor

Merchant / POI

Access Device(Card, Transponder, Terminals ….)

Rewards(Points, coupons…)

Program(Loyalty supplier, database, rules)

Collateral(setup, statements, printed materials)

Technology(Systems, processing, hardware, firmware, Issuing)

BanksIssuing andAcquiring

Processor


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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


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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.


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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.


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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.


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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%)


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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


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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


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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


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Types Of Card – Credit Cards

• Credit Cards– Visa/ MasterCard– Affinity Cards– Airline Cards

• Interesting Points– 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


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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


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Credit/Debit Online Transaction Processing

Legacy HostsLegacy Hosts

Visa or MC systems

Visa or MC systems

ProcessorProcessor

-Merchant accepts card -Validates card by signature check or PIN-Processes transaction


-Consumer’s bank approves transaction, sends back to merchant -Settlement will post to statement.

-Consumer’s bank approves transaction, sends back to merchant -Settlement will post to statement.

Request

Auth

Settlement

Request

Auth

Settlement

-Merchant’s bank initiates transaction -Routes to locations determined by card ids for approval and processing

-Collects card ID/number, Merchant ID, Amount.

-Merchant’s bank initiates transaction -Routes to locations determined by card ids for approval and processing

-Collects card ID/number, Merchant ID, Amount.


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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


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Purchase/Procurement CardTransaction Processing

SIC FilteringSIC Filtering

Visa or MC systems

Visa or MC systems

ProcessorProcessor



-Merchant;s bank initiates transaction -Processes against SIC filter-Routes to appropriate locations

-Merchant;s bank initiates transaction -Processes against SIC filter-Routes to appropriate locations

-Processes transaction-Approves or Declines transaction-Posts to statements on settlement

-Processes transaction-Approves or Declines transaction-Posts to statements on settlement

Request

Auth

Settlement

Request

Auth

Settlement


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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


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Debit Offline Transaction Processing


Visa or MC systems

Visa or MC systems

ProcessorProcessor

Batch Request

Auth and Settlement

Settlement

Request

Settlement

-Merchant accepts card -Validates card with PIN-Processes transaction

-Merchant accepts card -Validates card with PIN-Processes transaction

-Collects batch data and formats clearing transaction-Approves or Declines transaction-Routes to appropriate locations

-Collects batch data and formats clearing transaction-Approves or Declines transaction-Routes to appropriate locations

-Processes transaction-Posts to statements


Auth and Settlement


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Types Of Card – Stored Value

• Stored-Value Cards– Gift Cards– Phone Cards– Mall Cards– Gas Cards

• Interesting Points– 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


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Stored ValueTransaction Processing

-Cards are preloaded with points. -Merchant requests transaction-Verifies Card

-Cards are preloaded with points. -Merchant requests transaction-Verifies Card

Legacy Hosts/filters

Legacy Hosts/filters

Visa or MC systems

Visa or MC systems

ProcessorProcessor

Request

Auth

Settlement

Request

Auth

Settlement

-Transaction processes like Debit-Card is validated against stored value hosts or filtering

-Transaction processes like Debit-Card is validated against stored value hosts or filtering




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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


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Membership CardTransaction Processing

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

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

Internal

Database

ProcessorProcessor

3rd

party

Database

Example:

Blockbuster

Example:

Dining Ala Carte


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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.)

http://www.demko.com/cs990517.htm


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Smart Card Transaction Processing

-Card and Terminals authenticated with cryptograms-Obtain PIN, if needed -Verifies static data on chip-Processes static programs offline-Sends transaction online -Routes to any internal legacies-Verifies risk parameters on card

-Card and Terminals authenticated with cryptograms-Obtain PIN, if needed -Verifies static data on chip-Processes static programs offline-Sends transaction online -Routes to any internal legacies-Verifies risk parameters on card


Visa or MC systems

Visa or MC systems

ProcessorProcessor

Online Request

Auth

Settlement

Online Request

Auth

Settlement

-Validates card and transaction data-Routes to hosts systems-Processes settlement -Posts to statements

-Validates card and transaction data-Routes to hosts systems-Processes settlement -Posts to statements

-Formats the crypto authentication request-Routes and initiate online transactions.

-Formats the crypto authentication request-Routes and initiate online transactions.


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Smart Card Overview

Electronic Ticketing & Automated Air Travel

Processes

Special Offers andLoyalty Programs

AutomatedCar Rental Processes

E-PurseEnhanced Customer

Information

Corporate Security

Automated Lodging Processes

POS / Merchant's

Logical & Physical Access

Voucher Replacement

Target Marketing and Expandable to other

Locations

Mobile Commerce

•Smart Card: 101

•The Market

•Smart Cards in Loyalty

•Lessons Learned


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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


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• 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

What is a Smart Card?


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Smart Card at a Glance!

Silicon

Operating System (MULTOS, JAVA, Windows)

Applications

EMV Loyalty Wallet Misc. Appl.

Contact Plate

1234 5678 9012 3456Joe Smith


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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


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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


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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.


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Fraud and Security

• Smart cards are protected with a public/private key infrastructure: – Digital Signatures– Cryptography to perform:

• Data Integrity• Authentication• Non-repudiation• Confidentiality


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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.


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Standardization

• EMV (Europay, MasterCard and Visa)

– Card specifications

– Terminal specificities

– Application specifications

• Cross-border concerns

• How are they doing so far?


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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


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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.


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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.


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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.


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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.


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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


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MasterCard

o Citibank planned September 2001 launch of 4m cards

o Applications: e-cash, loyalty, e-ticketing

o Strong alliances, yet Multos-based.


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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.”


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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


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Obstacles In Adoption

• Infrastructure

• Ease and convenience with Mag. Stripe

• Cost of card and conversion

• Retailer ROI

• Cardholder confidentiality

• Standardization


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Lessons Learned

• Version and program control

• Application segregation

• Transaction processing changes

• Card/program expiration dates

• Replacement cards

• Branding

• Servicing

• Information management / multiple databases


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A Quick Review

Frequent Flyer & Card Programs


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• 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


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• "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


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• 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


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Top Banks With Unrestricted Programs:

• Capital One

• GE Capital

• Travelers Bank

• Direct Merchants

• Bank One

• Wells Fargo

• Household Bank

• Town North

• Citibank

• Household Credit

• First USA

• Fleet

• Morgan Stanley Dean Witter

• Chase Bank

• Charter One

• MBNA

• HSBC

• Comerica

• Merrill Lynch


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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


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Universal Mile + Network + Card

300 Miles 800 Miles250 Miles100 Miles 375 Miles300 Miles

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

Gas & OilGrocery Electronics Trip TeleComRetail

(online & offline)

+ + ++ +

The Network as a Catalyst for Increased Spend and Activation

Miles Earned Through Partners: 2,125Miles from Card: 1,325 +

Total Earning that Month: 3,450 +

PLUS all other card purchases

outside the partner network

$Purchases on

card at partner retail locations

XYZ BANK

$1,325


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Universal Mile + Network + Card

$0

$100

$200

$300

$400

$500

Incre

ase in

Mon

thly

Ch

arg

e V

olu

me (

in

$M

illion

s)

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

Average Monthly Spend

Incremental monthly revenue volume increases 400%+ & revenues increase $100 Million + a year.

Sample Card Issuer with 200,000 cards

Increased Spend

Increased Activation

Increased Acquisition

TOTAL

$ 4.0 M

$ 2.7 M

$ 1.9 M

$ 8.6M

$ 48.0 M

$ 32.8 M

$22.3 M

$ 103.1M

Monthly Revenue Increase

Annual Revenue Increase

EXAMPLE*

Incremental monthly charge

volume goes from $72M to $314.2M—an increase of

430%


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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


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Trends – Relationship Convergence

Wireless Data

Availability

Security Loyalty


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Thank You For Your Time

Kim Resch, Founder and President

Creative Commerce Group, Inc. is dedicated to the support of their client’s needs and solutions. Each client offers unique and special challenges, whether in technology, in concept development, in speed to market or hardware to make it happen. But through disciplined project management, we have helped clients' launch new products successfully, time-and-time again.

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:

•Resources for the Emerging Commerce Industry•Smart Card and Magnetic Stripe Solutions•Hardware Equipment and Implementation•Stored Value Card Applications•Loyalty Strategy Specialist•Project Management Formula “Methodlogically”

636-861-9850 or [email protected]

www.CreativeCommerceGroup.com

http://www.creativecommercegroup.com/


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Thank You For Your Time

David Carrithers, Chief Bee KeeperProviding 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

707-484-3620 or e-mail [email protected]

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

Card Industry Overview

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