Card Overview Final

8/8/2019 Card Overview Final

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Overview Of CardIndustry

Technology To Loyalty


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

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Commerce has become atechnical issue. It is not onlyabout making a financial

transaction, it is about havinga relationship with theconsumer while they areexchanging currency for goodsand services.

A Thought


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Insight

Kim Resch

Extensive Experience in Debit, Credit, and SmartCards, Mobile Commerce, Loyalty and Incentives.

Practical Experience in new product launchesincluding Amex Blue and smart Visa.

Specializes in project strategy, project management,implementations, and training in the emerging areasof 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 andpayment types available in the market

Insight into how card products areprocessed & the players

Review of the loyalty card industry How & where the money is made in the

industry

Review of the credit card & airline loyaltyprograms

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 tobe called "metal money.

1924 - General Petroleum Corporation issued the first metalmoney 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 andairlines introduced similar cards. Credit cards grew in popularityuntil the beginning of World War II when "Regulation W"

restricted the use of such cards during the war and temporarilysuppressed 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

(hon tr, bi hon) 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 accountfor 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 - Jrgen 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, andrequired 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. Likeits 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 organizationswho both issue credit cards and set and maintain the rules for processing. Theyare both run by board members who are mostly high-level executives from theirmember banks.

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

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

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

Smart Card/Chip Card: A plastic card embedded with an integrated circuit, orchip, that communicates information to a interface device. Chip cards offerincreased functionality through the combination of significant computing powerand data storage. Chip cards are capable of holding multiple applications andsometimes are referred to as Multi-Ap Cards.


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Definition of Terms

Online Authorization: A method of requesting an authorizationthrough 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 betweenthe card and terminal at the point of transaction without sending thetransaction online to the Issuer for authorization. Transactions are sent inbatch format to the processing systems.

Processor: A vendor acting as the agent to a bank that providesauthorization, 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 orcompanies on the transactions, usually a % of the sale price.


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Card Industry Landscape

TheWhy!

ThePlayers

TheProgramsSpecifics

TheHow!

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 issuedover 437 million branded cards world wide, 15.4 percent morethan the previous year. The number of cards issued in the USreached 235.1 million in 2000, 16 percent above the 1999level.

MasterCard association generated $857 billion in gross dollar

volume (GDV), which includes both purchase activity and cashtransactions, representing a 21.5 percent increase on 1999. Inthe fourth quarter of 2000, GDV rose 19 percent to $231billion. In the US, full year GDV registered its highest growthrate 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 salesvolume 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 issuescards for 4,000 groups, ranging from virtually every collegeand university in the US to the International Bridge Club.

The company's 2000 annual report says its average accountbalance was USD $3,519, compared with the industryaverage of USD $2,311. The average transaction value forMBNA customers was USD $129, compared with theindustry's USD $99.

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

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


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Card Facts

Affinity Cards

MasterCard has more than 12,000 co-branded and affinityprograms worldwide. Visa has about 9,000 multibrandedprograms worldwide. About 20 percent of its US card baseis co-branded or affinity.

Auto and airlines cards each account for 23 percent of theco-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, whichsupport member banks, which share a common network

American Express & Discover Card are, for-profit companiesand own their own networks

All card associations and companies charge an interchangefee 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, plussometimes a processing fee (between .002% and 1%)


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How Money Is Made

Processors charge a fee to handle transaction bundlingand data reporting, etc. Range between 1 cent to 25cents 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 andfiltering support (range from $50,000 to $200,000 a year)

Cost per card, by card manufactures range from 10 centsto $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 salesopportunities


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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 drawdown 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 OnlineTransaction Processing

Legacy HostsLegacy Hosts

Visa or MCsystems

Visa or MCsystems

ProcessorProcessor

-Merchant accepts card

-Validates card by

signature check or PIN

-Processes transaction


-Validates card by



-Consumers bank approves

transaction, sends back to

merchant

-Settlement will post to statement.

-Consumers bank approves

transaction, sends back to

merchant

-Settlement will post to statement.

Request

Auth

Settlement

Request

Auth

Settlement

-Merchants bank initiates

transaction -Routes to locations

determined by card ids for approval

and processing

-Collects card ID/number, Merchant

ID, Amount.

-Merchants 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, bycategory)

Intense reporting & tracking Main target B2B & corporate travel

Operate on an open platform, with some levelof tabling/filtering


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Purchase/Procurement CardTransaction Processing

SIC FilteringSIC Filtering

Visa or MCsystems

Visa or MCsystems

ProcessorProcessor


-Validates card by




-Validates card by



-Merchant;s bank initiates

transaction

-Processes against SIC filter

-Routes to appropriate locations

-Merchant;s bank initiates

transaction

-Processes against SIC filter



-Approves or Declines

transaction

-Posts to statements onsettlement


-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 (continualdeposits)

No credit line (instead an overdraft line)

Concern by retailers on fees

Runs on bank transaction networks (Interlink andMaestro)

Networks originally designed for banks to shareinformation

Operates on an open and/or closed platform withsecurity

Filtered (selective use) and open available


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Debit OfflineTransaction Processing


Visa or MCsystems

Visa or MCsystems

ProcessorProcessor

Batch Request

Auth and Settlement

Settlement

Request

Settlement


-Validates card with PIN



-Validates card with PIN

-Processes transaction-Collects batch data and formats

clearing transaction

-Approves or Declines transaction


-Collects batch data and formats

clearing transaction

-Approves or Declines 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 achain, to a mall

Funds are pre-loaded on the card most once spentare 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

LegacyHosts/filters

LegacyHosts/filters

Visa or MCsystems

Visa or MCsystems

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

3rdparty

Database

Example:

Blockbuster

Example:

DiningAlaCarte


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2001-2004 BusinessHive & Creative Commerce Group.All rights reserved. 36

Types Of Card Smart

Smart Cards Multi functional (debit, stored-value, credit)

Simple cards to very complex (based on chiptype)

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


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Smart CardTransaction 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 MCsystems

Visa or MCsystems

ProcessorProcessor

Online Request

Auth

Settlement

Online Request

Auth

Settlement

-Validates card and

transaction data

-Routes to hosts

systems

-Processes settlement


-Validates card and

transaction data

-Routes to hosts

systems

-Processes settlement


-Formats the crypto authenticationrequest

-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 LodgingProcesses

POS / Merchant's

Logical & Physical Access

Voucher Replacement

Target Marketing and

Expandable to other

Locations

Mobile Commerce

Smart Card: 101

The MarketSmart Cards inLoyalty

Lessons Learned


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History of Smart Cards

Smart Cards have been around since the early 70s. Thepatent was registered in 1974.

Commercialization started in the early 1980s with phonecards.

In 1993, there were 300 million Smart Cards issued in theworld. (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 thehigher-end microprocessor cards, half of which will besubscriber identity module cards for mobile phones


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A smart card resembles a credit card in sizeand 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 3456

Joe 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 usehas 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 RadioFrequency

Combi-Card

Transponders or Key Fob

Operating Systems

Java CardMultos

Microsoft Windows for SmartCards


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Fraud and Security

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

To protect the consumer, businesses in the U.S. haveinvested in extensive online mainframe-based computernetworks for verification and processing.

The microprocessor on the smart card is there forsecurity. The host computer and card reader actually"talk" to the microprocessor. The microprocessorenforces access to the data on the card.


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Fraud and Security

Smart cards are protected with a public/private keyinfrastructure:

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

C li i


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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, multipleaccounts.

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 Europethan in the U.S.

In Europe the health insurance and bankingindustries use smart cards extensively. EveryGerman citizen has a smart card for healthinsurance.

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

Wh Th S t C d M k t I


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Where The Smart Card Market IsHeaded!

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

AmericanExpress

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

oVisa 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 of4m 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 superiorthan 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

Obstacles In Adoption


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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 & CardPrograms


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Frequent Flyer & Card Programs

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. Laterrejoins after dramatically losing market share without a FFP.Today Hertz belongs to 20 FFPs

After in-house Frequent-Stay Programs, hotels conclude that thegreatest marketing benefits still come from the FFPs


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"We didn't want an FFP. But it came to my attention thatFFPs were siphoning business travel away from us. We didit defensively, and I think if we had not done that we wouldhave 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 establishedexclusive relationships and Hundreds of credit cardissuers 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

Top Banks With Unrestricted


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Top Banks With UnrestrictedPrograms:

Capital One GE Capital

Travelers Bank

Direct Merchants

Bank One

Wells Fargo

Household Bank

Town North

Citibank

Household Credit

First USA Fleet

Morgan StanleyDean Witter

Chase Bank Charter One

MBNA

HSBC

Comerica Merrill Lynch


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Loyalty Learnings

71% of consumers if FFP said they wouldnt tradetheir 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 atypical credit card add miles and they spendmore 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 othercard purchases

outside thepartnernetwork

$Purchases on

card at partnerretail locations

XYZ BANK

$1,325


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Universal Mile + Network + Card

$0

$100

$200

$300

$400

$500

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

$2,400

Increas

einM

onthly

Charg

eVolume(in

$Millio

ns)

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

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

Sample Card Issuer with 200,000 cards

IncreasedSpend

IncreasedActivation

IncreasedAcquisitio

n

TOTAL

$ 4.0 M

$ 2.7 M

$ 1.9 M

$ 8.6M

$ 48.0 M

$ 32.8 M

$22.3 M

$103.1M

MonthlyRevenueIncrease

AnnualRevenueIncrease

EXAMPLE*

Incrementalmonthly charge

volume goes from$72M to $314.2Man increase of

430%


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Card & Mile Issues To Keep In Mind

Attainability Of The Program Member: LimitedEarnings Capability = Short-Term Loyalty &Interest

Single Partner, Stand Alone Programs: Even Top

Customers Cant Make For A SuccessfulProgram It Requires A Network

Just Because They Carry Your Card DoesntMean Youve Captured Their Heart: "The

research shows clearly that the existence of aloyalty card scheme is not associated with adegree of loyalty in shopping habits." -Source:Customer Loyalty Today


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Trends Relationship Convergence

WirelessData

Availability

SecurityLoyalty


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Thank You For Your Time

KimResch, Founder andPresident

Creative Commerce Group, Inc.is dedicated to the support of their

clients needs and solutions. Each

client offers unique and special

challenges, whether in

technology, in conceptdevelopment, in speed to market

or hardware to make it happen.

But through disciplined project

management, we have helpedclients' 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 SpecialistProject Management Formula Methodlogically

636-861-9850or [email protected]

www.CreativeCommerceGroup.com

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http://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 honestand straightforward counseling, coaching & implementation of business

solutions that improve profit performance and loyalty with employees,

channels andcustomers. 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

ManagementUnbiased Incentive Program Assessment & Support

Dynamic Organizational Development

Documents

Card Overview Final