Examples of card promotions possible when banks retain their acquiring activities

You can see these promotions across Asia, where many banks are still active in merchant acquiring and see it as a useful support function for their card issuing business. Some banks are finding that without direct control of acquiring, it is much harder to develop marketing promotions and partnerships with merchants (more here on banks having second thoughts about outsourcing their acquiring activities).

I took this picture on Saturday at a restaurant in Singapore. This promotion is exclusively for Citibank cardholders. When I paid, I saw that there were several terminals behind the counter, one of them a Citibank terminal. So Citibank has an acquiring relationship with the restaurant, but so do UOB and DBS, suppliers of the other terminals behind the counter.



Then, at a Caltex petrol station, I got this offer when I used my HSBC card. The offer is stapled to the credit card slip (it could have been printed at the bottom of the credit card slip instead, and targeted based on my prior fill-ups at Caltex, but it wasn't). Again, just like the prior example, Caltex has an acquiring relationship with HSBC.



Here are a few other examples of bank/merchant joint promotions:
Old, boring cards have trouble competing side by side with new generation cards
A crowd of cards caught copycatting, doing their best to look exactly alike
Another ‘Exciting-new-card-versus-boring-old-card’ picture
Tod’s leather goods
Making credit and debit cards more valuable in the Philippines


Since I was in reporter mode, I couldn’t help stealing a picture at an iconic retailer in Singapore that every Singaporean knows, Mustafa Centre.


You can clearly see 5 terminals here representing 5 different acquirer relationships. If you look closely, you can see the main feature that requires all these terminals – credit installments, with each bank offering their cardholders a slightly different plan.

Why doesn’t a third party processor offer a universal installment plan application that can link up to any of these banks through a single terminal? That would bring costs down for the bank, reduce counter top space for the merchant, simplify procedures for the clerk, open the installment feature up to lots of other banks that don't do acquiring, and provide the third party processor with a cool feature to help win new business.

Pay your taxi fare by SMS

I like solutions that mix old and new technology together, like paper receipt messages and e-payments. The right mix is much more effective than a pure electronic solution, which tends to be cumbersome and limited in capability. So I was interested to hear about this SMS payment solution being rolled out by an Abu Dhabi taxi company:

"After a taxi ride, you can follow the instructions on the card to pay the fare by SMS. You can type the taxi number and fare, and send an SMS to a given number. A confirmation message will be sent to the customer's mobile phone and to the electronic device in the taxi which will print the receipt."

Neat, simple, convenient, and works with any phone, now.

Boots till receipt promotions

Lots of merchants already print promotions and marketing messages at the bottom of till receipts, but they are based only on the amount the customer spends in one transaction. The next step is to print these offers and messages at the bottom of credit and debit card receipts, using a richer set of trigger criteria, like the date of the customer's last visit, or the number of visits or amount spent over a given period.


I picked up a couple things at Boots in London and received this promotional offer at the bottom of my till receipt. All shoppers get the offer. I didn’t use my Boots loyalty card (I don’t have one) and the checkout clerk didn’t ask if I wanted to apply for one.

But I did pay with a credit card.

Imagine if the same type of offer appeared at the bottom of the customer’s credit or debit card receipt, triggered based on whatever criteria Boots chooses, using payment data managed by Boots’ acquirer. The customer has been to Boots before, but not recently? Include a special offer at the bottom of the receipt, for occasional customers that could be shopping elsewhere. The customer is a heavy duty frequent shopper? Print a message encouraging the customer to apply for a Boots co-branded payment card.

How much will merchants spend on payment information value added services?

PIVAS – Payment Information Value Added Services: A platform that lets retailers deliver targeted promotions at the POS, via credit or debit card receipts (lots more here).

A few of my prior blog posts provide some insight into the value of marketing rich payment services, mainly at a macro level. For example, there’s the Deloitte study that shows that merchants will pay 7-9% for a full payment service which delivers sales, versus 2% interchange for payment alone. Also, we know that several promotional marketing tactics frequently used by merchants (direct marketing, in-store advertising, couponing, games, sampling…) represent a combined industry of over $100 billion in the US alone.

Another angle is to look at the cost to an individual merchant of delivering printed promotions, special deals or messages to customers. I’ve pulled a few examples from a Morgan Stanley report. See other examples here, here and here. Costs are generally stated in CPM, or cost per thousand, but I have stated them in costs per individual impression.

Mass distribution methods generally cost advertisers a few cents per impression. This includes newspaper advertisements (2¢ per impression), free standing inserts, i.e. coupons in the Sunday paper (less than 1¢), shared direct mail methods such as coupon books (4¢). But how about targeted communications?

For most retailers, the only way to target distribution is through direct marketing, database rentals and postal mailings. At 90¢ per impression or more, most merchants have to use targeted distribution channels very sparingly, especially in low value sectors like quick service restaurants, supermarkets, convenience stores and petrol stations.

Printing targeted promotions at the bottom of POS receipts is obviously much less expensive. It can help merchants see more value in bank owned payment networks. And it can help attract new revenue streams to banks (as I was writing this piece, I received a report that merchants are paying one of Welcome’s bank customers 5¢ to 30¢ per transaction - plus the normal campaign management and setup fees ranging from thousands of euros per year to tens of thousands … but that’s another story for another blog post).

There is another, similar, POS based distribution method, Catalina Marketing’s checkout coupon service, which I didn’t mention earlier because it is almost exclusively paid by consumer goods manufacturers and limited to supermarkets. Companies like Procter & Gamble pay around 7.5¢ per printed impression, and even more when offering a coupon to buyers of the competitor’s product.

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.

Who says promotional marketing is not universal?

I took this picture walking through Little India in Singapore, close to Mustafa Shopping Centre.

This might be the last time I blog on this subject. I used to hear people say things like, "Merchants in rich Western European countries might do the types of promotions you are talking about, or maybe even some of the large Western retail chains in my country, but nobody else does."

I haven't heard this in a while. Maybe I can drop this angle now and let it rest.

Real merchant testimonials

Last week I posted a video that includes interviews and testimonials from merchants in the Philippines, describing how they are using BPI’s Real Thrills promotional marketing capabilities. Here are a few sound bites. (The sound bites are also in Powerpoint format which can be downloaded here to include in presentations to banks and merchants.)


“The top two major challenges are competition and of course, continuously improving our sales,” says Mae Cu Unjieng, Chairman of Nike Women.

“To find new ways to incentivise customers to come into Nike Women’s store. That’s not always easy to do.”

What does she think of targeted receipt promotions offered by BPI’s acquiring services, which leverage marketing data inside BPI credit cards?

“A great idea to give customers a reason to come back and shop for more,” she says. “We don’t have to do anything. No paperwork, no reporting, because it’s on the chip.”

And no need to issue Nike co-branded credit cards or even loyalty cards. Customers simply use their normal BPI credit cards.


“No need to check and collect receipts,” says Jodie Gadia, General Manager of Robinsons Supermarket Chain.

“It’s all in the chip, and it comes out on the charge slip. So easy!”

Click here to see a newspaper ad describing a card-based promotion that Robinsons is running.



“It’s automated,” says Anton Ramos, President, Music One. “And there’s no more hassle and paperwork."





“It is very expensive to communicate to a broad market,” says Audrey Tanco, Sales and Marketing Manager, Bizu restaurants.

“So we have to really think of very creative ways to get our customers to keep coming back.”




“The best thing about it?” asks Robin Cu Unjieng, President and Managing Director of Nike Women.

“Real Thrills is free!”



I haven’t seen any statistics yet, but I expect that we will see results in line with what we have seen from other banks. The figures that Welcome has collected from other banks show that a card brand’s transaction volume can increase by an average of 75% when merchants use the card as a targeted promotional marketing platform.

Why an unregulated interchange model is crucial to fostering competition between payment schemes

Statements from regulators indicate that their focus is less on abolishing interchange than on exploring ways to deal with the variations in levels of fees in different markets and for different card products. EU competition commissioner Neelie Kroes recently said that while the commission would not abolish interchange it would continue to assess the legality of current fee levels. The solution usually evoked consists of some form of levelling of fees across the EU, through regulation which would result in payment schemes all adopting the same legislated fee levels. This would be unfortunate. Regulating interchange fees would eliminate a powerful incentive for payment schemes to create innovative products and services which benefit merchants. Payment schemes should be able to compete with each other to make their products more useful and valuable to merchants, their incentive being the ability to generate higher interchange and, in consequence, the ability to attract banks keen on receiving more interchange.

With SEPA, European banks will be able to choose between multiple debit brands for their cards. Payment schemes are competing fiercely to have their brands chosen by banks. Interchange is a powerful differentiator. As competition between schemes increases, there will be a growing desire to raise interchange fees to attract issuers. If the system functions properly, brands that don’t offer enough value to merchants should find it more difficult to raise fees than brands that provide more value.

The current interchange model, with some adjustments, is a powerful tool to foster innovation for the benefit of merchants. If merchants were able to negotiate interchange fees and choose freely between payment methods which give them the most value in relation to their cost, then normal market forces would automatically force card fees to their acceptable levels. However the nature of the payment industry makes it difficult for merchants to negotiate interchange fees.

Capping fees through regulation does not solve the problem because it will not create a market driven system. It will simply cause the current payment infrastructure to ossify at essentially the present level of functionality. With little incentive to innovate for the benefit of merchants, payment schemes will not put much energy into new merchant-centric features. The system will remain essentially as it is today, with innovation focused on new cardholder-centric features. It might be hard to imagine today the types of new payment features which will be attractive to merchants, but this does not mean that payment schemes will not discover them in the future. Abolishing the incentive to search for these new capabilities will guarantee that they are never found.

A viable solution already exists in a growing number of countries. Leaving fees unregulated, but giving merchants the ability, for example, to easily surcharge card brands which are too expensive in relation to their value, creates a powerful incentive for schemes to make their products and services more useful to merchants. In response to this pressure, and to avoid having their cardholders subjected to surcharges, some payment brands will manage to create enough value to convince merchants to accept the higher fees, while others will simply have to reduce their fees. In practice, customers should see little if any surcharging, and merchants will get far more value for their money.

There are many ways in which payment schemes can innovate to make their cards more valuable to merchants. The most effective solutions will focus on leveraging payment data to help merchants solve major problems at the point of sale, in the store, as the card is being used. For example, payment schemes are already beginning to help merchants improve the efficiency of their promotional marketing activities, an industry estimated at $342 billion in the US alone (dwarfing US interchange fees of $40 billion). These budgets can be made more effective by leveraging customer behaviour data available at the moment of payment, for delivery of targeted promotions on credit and debit card receipts. This is my company’s area of expertise.

Another area in which payment schemes could better help merchants is by addressing the issue of fraudulent and abusive returns, which cost US retailers $16 billion annually, eclipsing the $3 billion that banks lose due to card fraud. Over half of returns fraud is attributed to customers “renting” merchandise for free by purchasing a product, for example an expensive camcorder, using it once to record a wedding or graduation, then returning it for a refund. 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. A solution which leverages payment data at the POS to identify potential abuse, with no need for the cost and effort of operating a database and authorization service, and no need for a picture ID, would be very valuable to merchants.

It is reassuring to see that regulators accept interchange as an important part of an efficient payment system. It would be even more reassuring to see regulators recognize the importance of interchange as a competitive weapon between schemes. Competition is fiercer than in the past, what with developments such as SEPA and with MasterCard and Visa becoming profit-driven companies that must show strong growth to investors. There is an opportunity for regulators to leverage this growing level of competition in a way that creates more value for all players. Capping or cutting interchange fees would cause that opportunity to be wasted.

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.

2007 Promo Industry Trends Report: which categories have the greatest potential to help justify interchange fees?

PROMO Magazine has published its latest industry trends report. The survey reveals a blurring of advertising and promotions budgets, meaning that “promotion can no longer be viewed as below the line-a term that used to be an insult on Madison Avenue.” One survey respondent wrote, “Advertising’s down, promotion’s up...it’s getting hectic as they overlap.”

42% of marketers surveyed intended to increase consumer promotion spending this year. Only 7.2% expected to reduce it. Another interesting statistic: over a third of respondents are doing more cross-promotions with outside partners.

Several promotional marketing categories are of special interest to banks looking at tapping into new budget categories to justify interchange fees. In-store advertising alone is a $42 billion industry in the US, around the same amount as total interchange fees paid by merchants last year to accept Visa, MasterCard, American Express and Discover cards. Spending on loyalty programs is still at $2 billion, like last year. That’s the same as sampling ($2 billion) and just a little more than games ($1.8 billion). Direct marketing still tops the charts at $53 billion.

Building promotional marketing features into the payment transaction can go a long way towards justifying interchange fees, even if only a small portion of these budgets get linked to receipt promotions triggered through the use of payment cards. Unfortunately, payment marketing people for the most part only focus on loyalty when they should also be talking about other tactics as well, such as games, sampling, coupons, etc.

Gartner: payment schemes need to offer merchants new promotional marketing capabilities at the POS to reduce pressure on interchange

ONLY 10 MORE DAYS to view this valuable Gartner report for free! Then we have to take it off our server.

Gartner has recently published a report, titled “Banks' Retail Payment Operations at a Tipping Point”, which we found so interesting that we obtained the right for you to view it.

Here are some of the report’s recommendations for banks:

“Introduce PIVAS [Payment Information Value-Added Services] to reduce pricing pressure from merchants and initiate a virtuous circle for retail payment operations. Merchants must actively support card programs and emerging payment solutions, but they are challenging the pricing model for the interchange. It's time to introduce services such as PIVAS to convince them of the real value of bank-sponsored retail payment networks.”

“An EMV-compliant card would store cardholders' shopping patterns on the chip (for example, how many times the cardholder has used a card at a specific retailer or whether the person has shopped at that retailer).”

“As a result, the retailer will have a platform to deliver tailored promotions at the POS that account for its marketing strategy and the activity and preferences of the customer. The promotion or message can be delivered via a POS receipt.”

Click here to view the report now.

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).

Making credit and debit cards more valuable in the Philippines

Robinsons supermarkets in the Philippines are offering customers a cash rebate that looks a lot like promotions you might get anywhere else in the world, until you look closer and see an interesting difference in how the rebate is actually delivered.

“Get 100 pesos back for every 5,000 pesos accumulated purchase at any Robinsons store.”

The promotion is clean and simple. There is no need to collect receipts across multiple transactions and submit them to a cashier, which is the way customers usually have to claim traditional rebate discounts. Here the credit card chip keeps track of the customer’s spending then automatically applies a receipt discount when the customer has reached a 5,000 pesos threshold.

The newspaper ad in this picture highlights something else. When you simplify the promotions process for the retailer and make credit and debit cards more attractive and valuable, the retailer actively encourages customers to use their card to pay. In this example the promotion is only for BPI Credit Cards. In other examples, the retailer will be able to offer promotions to a larger group of customers, say all MasterCard Maestro cardholders (see “Making MasterCard’s Maestro the preferred debit brand in post-SEPA Europe”).

We want to help payment brands offer valuable features to merchants, so merchants encourage customers to use that brand over others, interchange fees are easier to justify, and the brand is accepted by more banks. Our customers are now beginning to provide data on how Welcome’s approach can help payment brands dramatically increase market share.

How focusing on acquisition features (rather than loyalty) can lead to better protection of interchange fees

Ron Shevlin attacks the fundamental concept underlying customer loyalty, the common belief that “it costs X times more to acquire a customer than to retain one”. After you read his blog post you come back to me and say, “OK, Aneace, so loyalty might be a bit overrated. What in the world does that have to do with interchange?”

The tendency to stress loyalty tactics over acquisition could cause the industry to sell itself short when designing payment information value added features which help to justify interchange fees. Acquisition tactics are often much more valuable to merchants, and, as a major side benefit, it turns out that they function best on general purpose credit or debit cards, rather than store cards, so merchants need banks more.

Here are a few simple examples using payment data hidden in the card to trigger receipt promotions. They are all based on attracting and exciting occasional customers, rather than rewarding loyal customers.

Recognizing a customer who has not been to a store in a long time and being able to print a special offer on the credit or debit card receipt is simple, cheap and irresistible for almost any merchant. All that’s needed is a simple bank payment terminal. No need for a CRM system, database tools or technical expertise. The feature is simply built into the standard payment transaction. It is a valuable feature that is uniquely available through general purpose credit or debit cards, not store loyalty cards or private label payment cards (remember, this customer is not a frequent customer, so he is not going to pull out his loyalty card).



You can’t call the special offer a reward because the merchant is not rewarding any type of desired behaviour. You can only refer to it as a promotional offer. Calling it a reward is bizarre.

Another example is sampling, a promotional marketing tactic which is almost as big as loyalty. Promo Magazine says that “product sampling is the most influential in-store marketing method when it comes to influencing consumer purchase decisions.” General purpose cards can help make sampling even more effective. Behaviour data stored in new generation credit or debit cards can help merchants avoid giving the same samples to everyone over and over again. Instead, merchants can give customers a different surprise sample at each visit, encouraging them to try many different products.


The receipt acts primarily as a trigger to alert the clerk to hand out a specific sample pack. The trigger could be on the receipt, as in this example, or it could be a flashing display that the clerk sees. The idea is to use the payment transaction to help enhance and improve the marketing activities already happening at the point of sale.

Let's throw in a twist. This payment feature could allow merchants to offer higher value samples, for example only at a customer’s 4th visit in a given period, which is much more effective than giving the sample to anyone that walks in the store. Yes I know, this little twist looks kind of like loyalty, but it’s not, because the merchant is not saying “shop 4 times and you get this big sample”. Calling it loyalty is confusing and diminishes the value of simply making product sampling more effective.

Games are another promotional marketing tactic almost as big as loyalty. Data in the payment card can be used to create simple game promotions that appear at the bottom of credit or debit card receipts, perhaps as part of an advertised promotion, or maybe just a surprise that pops up on the receipt.


Building these types of features into a single bank’s cards and POS terminals, in a closed loop system, helps to protect the bank’s merchant fees and brand value. This has been Welcome’s core capability for many years. Now, building the same features into a scheme payment product makes the product more attractive to merchants and therefore helps to justify the interchange rates attached to that product. This is Welcome’s new strategic direction.

“Perhaps mobile payment shouldn't just be thought about from the merchant’s perspective”

Timo’s comment on our mobile payment demo got me thinking about why so much of the innovation that I am excited about is focused on merchants. I can’t seem to get as excited about payment innovation that doesn’t benefit merchants, even though I know that this goes against the mainstream view point which focuses everywhere but on merchants. There’s lots of benefit in exploring an industry blind spot and being one of a very few to fill a need.

Few people focus heavily on making new payment technology much more exciting for merchants, yet without that, it will be difficult to find places that accept payment using contactless cards or mobile phones. It often seems like people are focused on either fiddling around with cool technology (the ‘solution in search of a problem’ syndrome) or they are looking at how technology can benefit themselves as a user (the ‘I would love to be able to leave home without my wallet’ syndrome, which is so self centred that it forgets about the complicated value chain that can prevent stuff from getting to market when a key player doesn’t see what’s in it for him).

Timo’s blog post shows a more nuanced understanding. I was impressed with the comment on using the receipt printer for what some people would consider a blasphemy (“What? Print a paper receipt when you can store the receipt in the phone’s memory?”) Here’s what Timo writes:

“It’s great to see that the transaction is very fast and there is at least basic audible feedback at the point of touching. It’s also interesting to note the integration of a paper receipt into the process. While a mobile wallet can provide payment history and receipts, the paper receipt builds trust in the transaction and its value should not be overlooked.”

Exactly!

Check out Timo’s blogpost on collaborative filtering. We are also working on something in the same space to build automated cross promotions along the lines of “people that shop like you also shop at these other places, for which we hereby offer you a special sample promotion.” But we’re looking at a mass market solution which simply prints the offer on the credit or debit card receipt. As we become comfortable with true mass availability (and consumer adoption) of NFC mobile phone concepts, it will be easy to begin migrating these features to the phone. Until then, paper is cheap, easy, widely understood by everyone and completely integrated within all retailers’ checkout procedures, requiring no re-training of staff or customers. Hard to beat!

Want to hear what merchants themselves are saying about mobile payment? Click here.

Mobile payment + targeted coupon delivery in a few hundred milliseconds

Frédéric Mayance sent me this video of a mobile payment demo using Welcome’s NFC applet integrated with a payment application in a mobile phone. Rather than simply doing a basic, boring payment transaction, the demo shows the payment terminal also delivering a targeted promotion to the customer, based on criteria set by the merchant. Enter the amount on the POS terminal, tap the phone and the payment receipt is printed, which now includes an offer that says “Buy one value meal, get a free dessert”.



“At each payment transaction", says Frederic, "the POS analyzes the behaviour data cookies contained in the mobile phone, compares them with the thresholds needed to trigger a promotion or message, and finally updates them according to the details of the transaction. The POS also analyses other data such as the customer’s date of birth and other segmentation criteria. All of this is done in less than 200ms therefore allowing a combined transaction in one single tap.”

Now, some people will wonder why this video shows the coupon being printed on the receipt rather than stored on the mobile phone in a paperless format. Some offers are useful in an electronic format, but in many cases printing a paper offer is much easier for merchants and customers to deal with.

From the merchant’s perspective, no integration is needed with the scanning device. Powerful targeting methods can be used to deliver promotions using a simple payment terminal. The customer has been here before, but it's been a long time since his last visit? Print an offer to encourage the customer to come back again quickly. Trying to get customers to sample other items, not just the basic lunch menu? Print an offer for a different sample item at each visit, rather than giving the same samples out over and over again.

The vast majority of promotional marketing offers are for specific items or groups of items, like the “Buy one value meal, get a free dessert” offer in the video. A paper promotion is treated just like any paper coupon that cashiers are already trained to accept, so there is no impact on the merchant’s procedures or systems. When the coupon is electronic, the process becomes much more complex and requires substantial integration with the retailer’s scanning systems, which is not always a viable option for most retailers. It’s easy to forget that the real benefit to the merchant is the targeting ability that new payment technologies offer, not paper elimination.

The applet used here is based on the one that Welcome uses inside standard contactless cards, so the same infrastructure can be used for both contactless and mobile payments. The added value to merchants makes it much easier to expand contactless and NFC acceptance beyond the very small number of shops that are interested in contactless in its current boring and low value format.

Fresh data reveals a new way for payment brands to dramatically increase market share

Gartner suggests that payment brands need to “introduce Payment Information Value Added Services (PIVAS) to reduce pricing pressure from merchants and convince them of the real value of bank-sponsored retail payment networks.” Welcome now has fresh new statistics that show that these services also help payment brands dramatically increase transaction volume and market share.

We have been building ROI models with our customers for years, primarily concerning the bank’s own card issuer related metrics on cardholder acquisition, card usage, retention, etc. Banks have now begun sharing new data that can help understand how a payment brand can benefit when merchants are excited. The results confirm our premise that a payment brand becomes much more competitive when merchants can use data hidden inside the card’s chip to deliver targeted messages and promotions on the POS receipt. What do merchants think, in a nutshell? “Nine out of ten merchants perceive it positively,” says a Kasikornbank executive in a Cards International interview. “Instant marketing at the POS is the way we convey the concept to the merchants.”

The graph below summarizes the results achieved at specific merchants in various retail categories. The figures show that a card brand’s transaction volume can increase by an average of 75% when merchants use the card as a targeted promotional marketing platform. What drives such a high increase? The fact that merchants find the payment product valuable, of course!



When a scheme’s product is valuable to merchants:

• Merchants encourage customers to use that payment product over others.


• Merchants encourage customers to get a card if they don’t already have one.


• The cards are more attractive to customers, so easier to sell.


• Interchange fees are more easily justified with regards to that payment scheme.


• The product is adopted by more issuers.

When the product is not valuable to merchants:

• They encourage use of cheaper payment methods (such as cash).


• They make no special efforts to promote card acquisition.


• The cards are no different than those of other payment schemes.


• High interchange fees are not justified, and end up getting cut.


• Banks prefer other payment products.

This is fundamental stuff. We’re talking about the engine that drives competition between payment brands. More value for merchants means more value for issuers and a powerful new way for payment brands to compete.

You can find the individual merchant case studies here, all compiled by Pierre Boces.

Gartner: payment schemes need to offer merchants new promotional marketing capabilities at the POS to reduce pressure on interchange

Gartner has recently published a report, titled “Banks' Retail Payment Operations at a Tipping Point”, which we found so interesting that we obtained the right for you to view it.

Here are some of the report’s recommendations for banks:

“Introduce PIVAS [Payment Information Value-Added Services] to reduce pricing pressure from merchants and initiate a virtuous circle for retail payment operations. Merchants must actively support card programs and emerging payment solutions, but they are challenging the pricing model for the interchange. It's time to introduce services such as PIVAS to convince them of the real value of bank-sponsored retail payment networks.”

“An EMV-compliant card would store cardholders' shopping patterns on the chip (for example, how many times the cardholder has used a card at a specific retailer or whether the person has shopped at that retailer).”

“As a result, the retailer will have a platform to deliver tailored promotions at the POS that account for its marketing strategy and the activity and preferences of the customer. The promotion or message can be delivered via a POS receipt.”

Click here to view the report now.