Interview: Card loyalty and rewards trends

Recently, two payments journalists in two separate interviews asked me similar questions on trends in card loyalty and rewards programs. Here is a paraphrase of some of the questions, along with my answers.

“Card rewards programs appear in Europe to be merchant based whereas in the US the bank funds the rewards directly. Why do programs work so differently between the US and Europe?”

In fact, most banks in Europe also offer bank-funded points and cash back rewards, just like US banks. The difference in some programs comes from a structural difference between how banks in other parts of the world are organized. Outside the US, you can frequently find large national banks that are big in card issuing and big in merchant acquiring at the same time. For example, in the UK, three banks dominate the acquiring market, RBS, Barclaycard and Lloyds. These three banks are also very large card issuers. Banks that are involved in both issuing and acquiring can leverage their organizational structure to develop deeper relationships with merchants and create more value for their card programs. US banks do not have huge market share in acquiring, and thus have more trouble developing such relationships with merchants.

“What is the goal of banks working with Welcome?”

Many banks use Welcome’s technology to enhance their loyalty and rewards programs, through a combination of bank-funded points or cash back as well as merchant promotions delivered only on the bank’s cards, i.e. “on us” transactions. In this context, the promotions are seen by merchants as an extension to the bank’s loyalty or rewards program.

Welcome is now beginning to provide the acquirer division within banks the ability to offer promotions on all cards, not as an extension to the bank’s loyalty program, but instead as a value added service that can be charged to merchants in the same category as other promotional marketing services that the merchant pays for.

A bank’s acquiring division could use our software purely for “on us” transactions, or could also explore a combined approach, for example by providing merchants the ability to offer promotions on all cards, at a fee per targeted message/promotion, yet privileging the bank’s cards by making the promotional fee on those cards free. The objective in this case is to satisfy the merchant’s need to target the largest number of customers, while also getting the merchant to encourage customers to use the bank’s card more. We can explore many different combinations of business models.

“Are points programs thriving, or are they on the contrary doomed to disappear?”

It often seems that every bank has a points programs, and that they are all absolutely identical. Add to that the growing pressure around the world on interchange, and it is easy to understand that points and cash back programs have clearly reached the point that they have to evolve into something new and different.

Banks have two ways of looking at the cost issue, essentially by asking themselves one of two very different questions. Some banks seem to be asking, “How do I reduce the cost of my loyalty program and get merchants and other partners to fund part of that cost?” Other banks are beginning to look deeper at the original objectives of loyalty programs, objectives that can sometimes be achieved through other means than traditional loyalty points or cash back.

For example, if the bank is trying to establish stickiness and encourage usage, perhaps this can be achieved by adding a contactless feature in partnership with the local transit system. Barclaycard is doing this in London with the London underground. Of course, the feature won’t help Barclays outside London, but for London cardholders, having a single card to get in and out of the underground could prove to be stickier and more “loyalty generating” than what we normally think of as loyalty when we focus too specifically on techniques like points and cash back.

Another example is through merchant promotions, where merchants can leverage all card transactions to offer instant promotions based on prior usage, right on the credit or debit card receipt, for a fee, whereas doing the same thing on the cards from a specific bank or even a specific payment scheme is free to the merchant. This would clearly give the merchant an incentive to put signs in the store encouraging customers to use that bank’s or scheme’s cards, and offer some promotions specifically to encourage usage of those cards. Tie in a lower interchange rate on those cards, and the merchant will get even more excited!

“Could coalition loyalty programs be the answer to get merchants to fund more costs?”

Coalition loyalty has been around for many years, yet I have only seen two countries, Canada and the UK, where these programs work on a decent scale. Both of these countries have similar retail market structures. In both the UK and Canada, customers can choose between two or three major food retailers, two or three major petrol retailers, two or three major multi-category department stores, and so on. A coalition program that combines one retailer in each category can be a viable proposition to customers, since most customers are likely to shop at each of those retailers anyway. But in most other countries, where the choice of retailers is larger, a coalition loyalty program will inevitably leave out several key retailers that a customer prefers to shop at. So you haven’t seen successful coalition loyalty programs take off on a big scale across the world, in spite of the fact that they have been around for many years.

Forum Monétique 2008

Voici la présentation de mon intervention hier à Paris, au Forum Monétique 2008.

Le titre: Comment valoriser le paiement auprès des commerçants? Peut-on renverser les tendances actuelles?

SEPA, co-branding, lobbys de commerçants, consolidation des processeurs,… autant d’initiatives et de pressions qui mènent à la baisse des revenus des banques acquéreurs. Quelles sont donc les initiatives visant à développer une stratégie de valeur ajoutée pour les commerçants? Les pilotes sans contact ou NFC répondent-ils à l’attente des commerçants et permettent-ils de renverser les tendances actuelles? Comment tirer plus de valeur de la transaction de paiement et réduire la pression sur les prix?

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More companies are adopting an interchange based ROI sales pitch

This company has developed an interesting interchange based ROI story for banks. Here’s the pitch:

“Bill Pay Solution Enables Card Issuing Financial Institutions to Earn $150 Per Consumer Per Year in New Interchange Revenue”

(PaymentsNews recently reported on the company, Yodlee, and their press release.)

I find this interesting because it is so direct and in your face. Who wouldn’t want to earn more interchange revenue without doing much more than linking to this vendor’s service?

I wrote last year about an ad that Welcome did on protecting interchange, and I mentioned that it was just a matter of time before other companies took a similar approach. I also expect that we will be seeing ads from companies taking the reverse angle, targeting merchants, processors and ISO's and showing how to cut costs by reducing interchange fees.

Behind the scenes: How Maybank helped Nando’s fast food chain reverse rapidly decreasing sales

Launched in Malaysia in September 1998, Nando’s restaurant specializes in chicken-based menu items. At the beginning of 2006, it was hit by a severe drop in sales sparked by two key factors: the threat of bird flu and the oil crisis. Malaysians became reluctant to travel by car to eat the famous Nando’s Peri-peri chicken. Maybank saw an opportunity to help Nando’s.

"Maybank created a promotion for the Nando’s outlet in the Mid-valley mall, one of the largest in Kuala Lumpur," says Welcome's Pierre Boces. "It involved 12 awarding merchants located in the mall, including GNC, Dockers, Hush Puppies, and others. Nando’s was the unique redeeming merchant."

For every 50 ringgits (Malaysian dollars) spent with a Maybank card, in a single transaction, at one of the 12 awarding merchants, the Maybank cardholder received a coupon entitling him/her to enjoy a ¼ peri-peri chicken for only 99 sen (cents). The coupon could only be redeemed in Nando’s outlet at the mall. The promotion lasted two months, starting May 1st 2006. Tent cards were set up on tables and counters at Nando’s and each of the 12 awarding merchants. Maybank cardholders received fliers with their monthly statements and a billboard was displayed in the mall.

"The promotion was a success for Nando’s and the 12 awarding merchants," says Pierre. "Although Maybank cardholders had to spend 50 ringgits at any of the awarding merchants, they got a ¼ peri-peri chicken for only 99 sen– a saving of 14 ringgits. Customers came with their families and spent more than just 99 sen on a ¼ chicken. The average ticket size by Maybank cardholders at the 12 awarding merchants during the promotion was 50 ringgits – 42% higher than the average ticket size of 35 ringgits prior to the promotion."

"The promotion was a real win for Maybank," says Pierre. "Maybank was contacted by many other merchants at the mall, asking to take part in the promotion, either as an awarding or a redeeming merchant."

The average spend on Maybank cards at Nando’s climbed from 73 ringgits six months before the promotion to 101 ringgits during the promotion. It continued growing, thanks to the momentum of the campaign, and eventually reached 121 ringgits six months after the end of the promotion.

The case study can be downloaded here.

Behind the scenes: How Maybank and Baskin Robbins increased credit card usage for low value purchases

This case study should be of interest to anyone that wants to get merchants to encourage customers to pay by card rather than cash for low value transactions. It should be of special interest to people involved with contactless cards (even if this case study is not about a contactless deployment).

"Maybank wanted to see greater use of credit cards for everyday purchases, and Baskin Robbins wanted to encourage customers to spend more," says Welcome's Pierre Boces. "A promotion was designed to accomplish both objectives at the same time."

Maybank helped Baskin Robbins design a promotion which delivered an instant offer when customers paid with their Maybank card at Baskin Robbins. For every 20 ringgits (Malaysian dollars) in cumulative spending during the promotional period, consumers could buy a single junior scoop of ice cream for only 99 sen (cents), a big saving for Maybank customers.


Run by all Malaysian outlets of Baskin Robbins, the promotion lasted six months, from October 2006 to March 2007. It was advertised at Baskin Robbins outlets and in Maybank’s quarterly news letter, the Kard Shoppe, which cardholders get with their monthly statements.

The promotion was successful for both Baskin Robbins and Maybank. Coupons were redeemed at the rate of 53% while the average spending on Maybank cards at Baskin Robbins climbed from 36 Ringgits two months before the promotion to 58 ringgits two months into the promotion. It stayed at 59 ringgits two months after the end of the promotion.

Download the case study here.

Behind the scenes: How networking with other Welcome licensees helped Maybank quickly recruit Pizza Hut

Pierre Boces has released several case studies on how Welcome's bank customers are developing stronger relationships with merchants. He just did one about Malaysian bank Maybank and Pizza Hut.

"Maybank learned that another Welcome licensee, UBL in Pakistan, had done a promotion with Pizza Hut, and decided to approach Pizza Hut for a similar promotion for Maybank cardholders," he says. "Pizza Hut quickly agreed, and the promotion was launched."

Prior to the promotion, customers eating at Pizza Hut’s 129 Malaysian outlets were spending an average of 45 ringgits (Malaysian dollars) and making an average of two visits a month. Pizza Hut rolled out a simple and attractive “One, Two, Three, Free” promotion with the following mechanics:
1st visit - Spend 65 ringgits and get a coupon for 10% off the next visit
2nd visit - Spend 65 ringgits and get a coupon for 10% off the next visit
3rd visit - Spend 65 ringgits and get a coupon for a FREE Regular Pan Pizza

The promotion ran at all Pizza Hut restaurants in Malaysia and lasted three months, from September to November 2005. It was advertised on tent cards in each restaurant. Fliers were also sent to Maybank cardholders with their monthly statements.


The Pizza Hut promotion for Maybankard customers was the first of its kind in Malaysia, different from other credit card promotions that rarely help merchants target their best customers. The innovative nature of the promotion attracted substantial interest in the press.

During the promotion, Pizza Hut saw a monthly increase in the number of cardholders being rewarded and the number of coupons redeemed. Maybank saw a 49% boost in purchases by its cardholders at participating Pizza Hut outlets.

You can download the case study here.

Welcome releases SPICED brochure for payment schemes

Welcome has released a new brochure on SPICED, the company’s product for payment schemes, designed to protect interchange fees.

The brochure describes SPICED features and how the product fits in with Welcome’s XLS, the company’s traditional solution for individual banks. It also describes how Visa payWave in the Asia Pacific region will be the first scheme product to be SPICED.

Identifying merchant pains that can be addressed with new generation bank cards

I promised to reveal some of the not so visible marketing work that Welcome provides to its bank customers, or performs on the client’s behalf. This post is about helping payment brands identify and solve major problems for merchants, so that our clients’ cards and services become more valuable. It is part of a series of posts that I'm calling Behind the Scenes.

You can hear merchants describe some of their marketing pains here and here, along with descriptions of how their problems were addressed by one of Welcome’s bank customers. But you don’t see behind the scenes, how the pains were uncovered and identified in a way that points to a solution that can be uniquely solved with our client’s payment cards.

How do you identify the merchant’s pain? How do you figure out how to tie your payment services into that pain? Pierre Boces, Head of Product Marketing at Welcome, says, “We often start by reading the retailer’s annual report, their competitor’s annual report, and industry studies on the web.”

Take The Body Shop for example. At the very beginning of their 2005 annual report, their mission statement talks about the customer experience no less than 3 times. They want to ‘deliver with passion to our customers a unique experience’, provide a shopping environment that ‘excites, inspires and informs’, and reinvest in the business to ‘constantly improve our customers’ experiences’. All of that is in the mission statement. Then on page 4 you can read in big letters in the centre of the page that ‘a new store design has been developed to offer customers an improved in-store experience at The Body Shop’. So you know that you need to focus on the customer experience.

On page 3, you can read a section on brand repositioning:

“Over the last three years, we have pursued a strategy of repositioning The Body Shop brand to the ‘masstige’ sector of the consumer market. This ‘masstige’ positioning differentiates The Body Shop by offering customers a shopping experience that combines excellent service with a comprehensive range of naturally-inspired personal care products that offer performance, indulgence and great value.”

The brand promises to deliver high quality products at the lowest cost. They cannot risk offering low quality products which will destroy that promise. They cannot risk offering discount promotions like 20% off this product or 30% off that product, because this would tell customers that the regular price is not really the lowest it could possibly be. On the very same page, they even say what type of marketing promotions work for them:

“Our global marketing programmes are designed to support the ‘masstige’ positioning of the brand. Promotions are developed to offer added value, sampling opportunities and gifts with purchase to encourage customer loyalty.”

So we know that we can’t ask them to give cardholders a 10% discount, and we know that they won’t be interested in loyalty points or miles because these tactics don’t fit the brand promise that they are promoting.

Pierre Boces describes his recommendations. “A better strategy would be to show how our client’s payment services can enhance the customer’s shopping experience with gift sample promotions printed at the bottom of the payment card receipt. For example, offer a different gift sample at each visit or a bigger and bigger sample each time the customer goes over a £100 cumulative purchase threshold. This fits with the Body Shop’s culture and marketing objectives much better.”

“Another idea that fits is to show how our client’s payment brand can take corporate sponsorship to a new level,” he says, “by making it easier for customers to donate to The Body Shop Foundation. How many customers shop at The Body Shop specifically because they appreciate the company’s engagement in charities? The annual report talks a lot about this. At many outlets, you can see signs next to the POS inviting customers to donate to The Body Shop Foundation and other organizations. Using the credit or debit card receipt to show the total cumulative amount that has been donated on each customer’s behalf, as well as amounts donated directly by the customer when shopping at The Body Shop, would link the payment brand directly into the retailer's brand promise, making our client’s brand that much stickier.”

Justifying interchange fees by helping retailers fight return fraud

The holiday shopping season is here. Return fraud is in the news again, right on time. And it’s getting worse. Retailers know what I'm talking about but many people in the payment industry and banking community might not. It's not a problem that banks face. But I talk about this because I believe that payment networks are ideally positioned to help retailers address this problem. Why should the networks do this? To help justify their interchange fees.

Fraudulent returns are expected to total $3.7 billion this holiday season, according to estimates from the National Retail Federation. For the year, retailers will lose about $10.8 billion to return fraud.

Over half of return fraud is attributed to the practice of "wardrobing”, where someone purchases a product, wears it and then returns it to the store for a refund. The practice, according to the NRF study, is on the rise.

Some retailers now require a picture ID when customers return merchandise, so clerks can check a database for possible abuse. This is the only solution available today. It is inconvenient and obtrusive to customers, the vast majority of whom return items in good faith. According to the NRF study, over 90% of returns are perfectly honest and legitimate.

Instead, why not take advantage of payment data to identify potential abuse? A solution which leverages payment data at the POS, with no need for the cost and effort of operating a database and authorization service, and no need for a picture ID, would directly benefit merchants.

I believe that the new competitive landscape (i.e. Visa and MasterCard as publicly held companies accountable to shareholders, competing more fiercely than ever before to get their brands on cards, with interchange being one of the top criteria for banks to choose one brand over another) will cause the payment brands to develop all sorts of new payment features which directly benefit merchants. When people at Visa and MasterCard start asking the question, "What can I do to make my brand much more attractive to merchants, so that they agree to my interchange fees and don't surcharge?" the types of answers that can emerge are endless. My blog has looked extensively at one angle, promotional marketing, which is Welcome's background. Return fraud is another, complementary answer to exactly the same question. There will undoubtedly be others. Other companies like Welcome will emerge with their own specific answers to the question, coming from their own specific areas of expertise.

Welcome is developing new technology that uses data stored within EMV chip cards to automatically authorize valid returns and refunds. It has no impact on a bank’s existing authorization systems, since it only requires data stored within the EMV chip. It simply requires the clerk to key in the original purchase date and the amount. In most cases, the refund is authorized instantly, making it more convenient and less expensive than the ID and database methods that merchants are currently putting in place. We are also adapting the technology to work with traditional magnetic stripe cards so that payment networks can leverage the existing cards already in people’s wallets.

See my prior posts on return fraud here.

Wong Wan Ling: "Getting the most out of Welcome's marketing expertise"

Wong Wan Ling is Welcome’s Asia Pacific Marketing Director. She has been involved with many of our bank customers in the region, and often directly with their retail partners. Some of you met her at our annual User Summit in Dubai last month. Here is what she has to say about Welcome’s marketing services:

“Many banks and payment services providers have greatly benefited from the technology that Welcome has developed. However, in the process of working with our customers to deploy the technology, we have learnt that sound technology, without strategic planning and execution, will not maximise the potential business results.”

“The technology itself provides an excellent opportunity for Welcome’s customers to introduce a disruptive innovation in their markets. However, it remains a challenge when marketers are charged with a new way to strategise and execute the new marketing initiatives which the new technology allows.”

“As with all market disruptive strategies and initiatives, new sets of skills, knowledge and know-how are needed to deploy and execute. More often than not, the new way of doing things requires the organisation to develop new sets of processes and work procedures to ensure consistent and cost-effective delivery. Many organisations do not have the formal structure or resources to do this.”

“Welcome’s core expertise lies in card marketing enhancement technologies that create value at the moment of payment. As developers and originators of the technology, Welcome is in the best position to be the ideal partner to help our customers push the limit on the market potential of the technology. With experiences from many market implementations of our own technology, we have developed a set of processes, expertise, and skills that can be very quickly implemented to fit any bank organisation in order go-to-market in the shortest possible time.”

Some banks want to develop their own in-house expertise in promotional marketing at the point of sale. Welcome’s training seminars have helped these banks enhance their branding, advertising, loyalty marketing and partner recruitment activities.

Other banks want instead to outsource all or part of their marketing activities. Welcome’s marketing experts and network of partner consultants help these banks manage many aspects of their program, from branding and advertising to partner recruitment and promotional campaign design and management.

We’ve evolved faster than I expected

Talking to Welcome’s customers at our User Summit a few weeks ago, I discovered that many of them see us as a strategic marketing partner. This both surprised and pleased me.

In my mind Welcome has always been a payment technology provider. A provider of infrastructure software for payment cards, terminals and back-end systems. Of course I’m very aware that there is a substantial amount of marketing involved in what we deliver, but I’ve always thought that that was standard practice for any new generation technology company like Welcome. Embedding a great deal of expert marketing strategy into the services provided to clients didn’t seem so out of the ordinary to me. But the discussions I had with customers made me realize that Welcome is providing much more strategic marketing support than banks are used to receiving from technology providers, and even from some traditional consultants and analysts.

Welcome has learned so much over the years from so many deployments around the world. The company knows a lot now about good and bad real-time marketing campaigns linked to payment, in many different business environments and many different merchant categories. That knowledge has become a key resource that the company delivers to its bank customers.

So I’ll reboot my mind with this new realization. And I’ll do a few blog posts which shed light on the types of marketing activities that go on behind closed doors at Welcome, which our customers see but which most other people don’t.

BPI releases new video - when was the last time you saw merchants really excited about a new payment feature?

And how can that excitement be channelled to protect interchange?

This 8 minute video (presented by BPI's Maria Cristina Go at Welcome's annual user summit in Dubai) is a collection of short interviews with top executives at Robinsons, the leading supermarket chain in the Philippines, Nike Women’s stores, a trendy restaurant chain called Bizu and a music retailer. These retail executives describe how they are using data inside BPI credit cards to target their promotions better and make their marketing campaigns more effective. When you watch the video, imagine using it as a tool to get lots of other merchants to also encourage customers to pay with their BPI card.

The executives describe the problems they face with current advertising and promotional marketing methods. Audrey Tanco at Bizu restaurants sums up the challenges from an ROI perspective: “It is very expensive to communicate to a broad market, so we have to really think of very creative ways to get our customers to keep coming back.”

The video then shows how BPI sets up the campaigns for merchants. This is a new, value added payment service that gets merchants to focus on the value that BPI provides, rather than the cost of payment acquiring or interchange fees.

“The best thing about it?” asks Robin Cu Unjieng, President & Managing Director of Nike Women. “Real Thrills is free.”



BPI is one of the largest issuers and acquirers in the Philippines. The bank runs one of the country’s two private label debit card and ATM networks, in a country with lots of debit cards but virtually none of them Visa or MasterCard debit cards. Their strength across both issuing and acquiring makes it possible for them to launch and operate a closed loop marketing platform for merchants.

Of course, most banks are not structured in this way, not even the largest international banks. And merchants in most countries would prefer being able to target a much larger customer base than a single bank’s cardholders. That’s why banks generally like being part of a branded network like Visa or MasterCard. Imagine a similar video showing how merchants can target their promotions to any customer paying with a Visa card. That's Welcome's new SPICED value proposition. I dare anyone to find a better way to justify interchange fees today.

Welcome’s User Summit – Dubai 2007

This year’s user summit was in Dubai. It was bigger and better than last year’s in Athens, but not nearly as good as next year’s!


On the first day of the event, many of us were surprised to see a panel discussion turn into a debate between two panellists, David Riddel of Novantas and Mark Bergdahl of American Express, on the relative merits of cash back versus points programmes. Welcome’s technology has achieved a level of richness which allows people to use it in completely different ways. The points vs. cash back debate is mild in comparison to other debates that are beginning to emerge. Like loyalty vs. promotional marketing. Or bank differentiation vs. interchange protection. All kinds of interesting subjects which will fuel discussions at future summits.

Also on the first day, Manoj Sugathan of Visa presented the new Visa payWave value proposition which now includes Welcome’s technology built-in, for the Asia Pacific region. There is a real opportunity for Welcome’s existing licensees to become value added acquirers for Visa payWave transactions. And they can get there first, before other acquirers, since their POS infrastructure already uses XLS. More information here.

On the second day of the event we saw a series of presentations by banks that are using Welcome technology almost entirely to enable merchant promotions, as opposed to doing points or cash back programmes. BPI presented a wonderful video of interviews with merchants, highlighting the ways that BPI is helping merchants solve major problems. I will do a separate blog post on that video, which is a very useful tool to get lots of other merchants excited and on board.

I have no idea where the next summit will be, but some of you have already suggested a few destinations. Sao Paulo? Paris? Singapore? Reykjavik?

Finally, an ad about new ways to protect interchange!

This ad is going into the EFMA conference guide for a Paris event at which I’ll be speaking next Tuesday.

This is probably the first advertisement in the world that specifically addresses interchange protection through new, merchant-centric payment features. As far as I have seen, most other interchange related ads have focused on litigation and stressing the unjustness of merchant complaints. I expect that several years from now, lots of companies are going to be promoting features, products and services that also protect interchange. But for now, this may possibly be the very first advertisement of its kind. It seems clear and simple now, but it has taken several years to get the message into this format. And it can still be much more powerful.

In the past, Welcome has mostly worked with individual banks that use our software in a closed loop issuer-acquirer network that helps the bank enhance its relationships with both cardholders and merchants. In that environment, the value proposition and ROI are based on protecting the bank’s fees, recruiting cardholders and merchants faster and easier (and at lower cost) and encouraging usage.

Today, we are working more and more at the payment scheme level, helping to make payment brands more attractive to merchants. The value proposition and ROI now are based on protecting interchange fees, recruiting issuers and acquirers faster and easier (and at lower cost) and encouraging usage.

The positioning described in this ad is a quantum leap forward.

For a more complete understanding of where this all leads to, check out the presentation on what a new generation Maestro card would look like (see Making MasterCard’s Maestro the preferred debit brand in post-SEPA Europe).

The Welcome trilogy: end of book one, the start of book two

We have just completed a management buyout of Welcome, in partnership with AXA Private Equity (see the press release here). Looking at the history of Welcome since it’s founding in 1996, and considering our objectives for the next few years, I see this buyout as the closing event of the first major book of a trilogy. The themes of this first part: building the company, achieving profitability and growing beyond the startup phase. In the second part of the trilogy, we will work at consolidating our current growth of 50% per year, grounding it on solid structural elements and a powerful business model. The final book of the trilogy begins with an IPO to raise the funds to help us grow even faster as we reinforce our leadership position as the most exciting provider of high value payment software in the world.

We have added a number of shareholders over the years, starting with High Co (a publicly traded marketing agency in France, part of the WPP advertising group) followed a few years later by Gemplus, Avenir Telecom and Dassault Multimedia. Then came the financial investors, Technology Fund in Singapore, BNP Private Equity in France and Quest for Growth in Belgium. They have all remained faithful to the company over the years. They all believed in me and in Welcome, and for that I give them my deepest thanks and appreciation, even though I know that this is not nearly enough. Thank you.

Today we have one single, major shareholder, represented by a group of individuals that were able to put together a complex deal that is really very exciting for Welcome’s people. Bravo to Laurent Foata, Jean-Marc Fiamma and Arnaud Dufer of AXA Private Equity. I am excited about beginning our board work together as we start with our brand new corporate governance structure built from scratch.

The one person with whom the management buyout would not have been possible is our CEO, Sebastien Guillaud. He has proven his value to many of us over and over again, and I am sure this success is just another in a long line of accomplishments he will achieve throughout his career. My deepest thanks to you Sebastien.

My deepest appreciations as well to Philippe Vinci and Craig Bennett, both newly appointed directors to Welcome’s executive board, and to the whole team at Welcome. Every single one of you helps turn the vision into reality.

I look forward to writing the second and third parts of our trilogy with all of you. The adventure is only going to get better and more exciting.

Debate: Are Paper Coupons History?

99 percent of coupons are never used. Some people feel that coupons are the single most inefficient marketing tool you could imagine. Are paper coupons history?

Since one of the features of Welcome’s payment software is to print targeted coupons at the bottom of credit or debit card receipts, we sometimes get pulled into this debate. Retail marketing executives don’t usually question the value of coupons, but banking executives are not as familiar with promotional marketing techniques and often show a deep desire to eliminate paper coupons. They shouldn’t. Here’s why.

Last year, RetailWire ran a piece called, “Are Paper Coupons History?” and invited marketing executives to give their opinions. There are less than a handful of negative comments. Unlike one executive’s strident cry that “the traditional paper coupon is going to die”, you will find that the vast majority of comments are balanced, subtle and generally positive.

Take the following comment for example:

“It doesn't matter if paper is an old technology and it doesn't matter that coupons are distributed electronically, too. Marketers use coupons because they help induce people to try their brands. When the coupon offer is compelling, great results are achieved. The fact that well over 99% of all coupons become trash doesn't matter when that figure is compared to the effectiveness of the alternatives. Well over 99% of all ad impressions (radio, TV, newspaper, magazines, billboards, table tents, signage, press releases, skywriting, package inserts, public transit posters, blogs, spam, online banners) don't induce people to buy.”

Welcome’s payment technology also supports e-coupons stored in a credit or debit card’s chip, essentially eliminating the need for a paper coupon. That sounds good, right? The best of both worlds, right? Not always. In fact, not very often. I will explain in another post why I would almost always prefer a simple paper coupon.

Google apps and the perennial debate over on-line versus off-line and distributed versus centralized processing

A recent article in Wired (Google Apps: Should You Switch?) is relevant to the payments world as more and more computing power is made available at the edge, within POS terminals and even cards themselves. The article compares the centralized approach of Google Apps with the distributed approach of Microsoft Office. There is no clear winner. “There are many reasons to get excited about Google's new plan, but there are just as many reasons to stick with the status quo.”

The centralized versus distributed processing debate of course goes back to much earlier times (as many philosophical debates do) when DEC came out with the first minicomputers that gave processing power to departments and divisions within large corporations, and avoided the need for everything to be done at the central mainframe. The debate will probably go on for a long time to come.

From Welcome’s point of view, and many others in our industry, the debate is irrelevant. We take a simple pragmatic approach. Computing power is available in lots of places, so let’s get the most use out of it. Some payment features work best centralized, others are very valuable at the edge. The question becomes an architectural design issue for each individual feature, rather than a philosophical debate.

Welcome's technology creates little customer behaviour data packets that are in some ways similar to cookies that a web site leaves on your PC to make it easier for you to go back to the web site again later. When a smart card is used, like an EMV card or a contactless card, we drop the customer behaviour data cookie onto the card, the easiest and cheapest place to store it. When a magstripe card is used, we store it on a server that is available for real-time access at the moment of payment. Then, the next time you go back to that merchant, the information in the cookie helps the merchant target promotions better and give you more than you would have gotten otherwise.

We've spent years working on the technology to get a tiny footprint. Right now we can fit hundreds of these cookies into the lowest cost cards on the market, in just a couple kilobytes of card space.

How contactless payment brands (PayPass, Visa Wave, ExpressPay) can be much more attractive to merchants

Welcome has just released a new brochure on how to make contactless payment brands like Pay Pass, Visa Wave and ExpressPay much more attractive to merchants, so merchants will promote one brand over the others, and encourage their customers to use that brand.

"Contactless brands like Pay Pass and Visa Wave promise greater speed and convenience at the moment of payment. Is that enough to get merchants truly excited about accepting contactless cards?"

"There is little or no differentiation between contactless payment brands. What can be done to get merchants to accept and encourage usage of one brand over others, without simply cutting fees?"

You can download the brochure here (pdf)

Preparing for our biggest and most exciting year ever at Welcome

We’re a high growth company, so next year is always going to be our biggest year ever. But there is “biggest” and there is “BIGGEST”. We can be in high growth mode without actually getting the most out of our potential. That to me is failure. Wasted potential is bad. Keeps me awake at night.

Over the last 3 years, we have sold software licenses for a total of 19.2 million cards in force and 248,000 POS terminals. Very good growth, but still tiny when you look at the global potential for our software.


We are still holding ourselves back. We still haven’t cracked some of the world’s largest markets yet, and we are still very far from our objective of providing a payment platform that is irresistible to all financial institutions everywhere. In many cases, we have simply stumbled onto success. Imagine what our growth would look like if we could replicate successful deployments in a much more industrial manner.

We’ve just finished a week of meetings at our headquarters in Aix-en-Provence, with lots of discussions on strategy and plans for 2007. As we saw in those sessions, making our products absolutely irresistible has been a constant theme over the past 10 years. We are still not there. Many banks find our products very attractive, and we do have lots of examples of banks getting lots of value out of our software. But that’s not nearly the same as irresistible.

Over the next few weeks, we will be focusing heavily on becoming IRRESISTIBLE, as we prepare for our BIGGEST and most exciting year ever.

Welcome achieves top quality rating

Congratulations to Vaibhav and his team, as well as the many people across the organization that worked on achieving the CMMI appraisal. The press release is here, and the interview with Vaibhav is here.

For a list of companies that have also achieved CMMI ratings, check out the Carnegie Mellon Software Engineering Institute web site here. Although the list is long, very few companies have achieved the same level of appraisal as Welcome. Just 5 in Singapore (where Welcome’s R&D and software development activities are based) and 13 in France.