Payments industry equipment and program providers are coming out with new programs and technologies that can help ISOs earn additional income. Below is a look at some of these new revenue opportunities.
In June, Peppercoin announced a comprehensive loyalty program for small payments both online and at the physical point-of-sale. The program is believed to be the first to enable merchants to attract and retain customers buying small dollar-value items and services such as a cup of coffee without requiring a separate pre-enrollment process or additional card. Peppercoin's approach to loyalty transforms a standard credit or debit card purchase into an opportunity to build a long-lasting customer relationship.
“Peppercoin's platform eliminates many of the barriers merchants face in implementing loyalty programs and provides a cost effective way to increase profitability through improved customer retention,” said Mark Friedman, Peppercoin President and CEO. “It extends the value of the existing card already issued to the consumer and seamlessly turns a regular card purchase into a chance to enhance customer value and loyalty.”
The program is aimed at merchants whose typical ticket is less than $25.
The under-$5 payment market is more than $1 trillion, almost as much as all Visa payments, and the under $25 market is several trillion dollars, according to Friedman.
Merchants can automatically enroll a customer at the time of purchase by swiping or tapping their card at the point-of-sale (or securely gathering the card details online in a digital environment), without requiring a separate application process. Each time the customer uses their card with the merchant, Peppercoin records the participation and eligibility for awards based on rules defined by the merchant.
Peppercoin’s solution provides flexibility in terms of tracking awards either in dollars or “point” denominations. Peppercoin’s loyalty solution works with all common purchasing options-prepaid, post-paid, subscription and pay-as-you-go.
This makes the entire process much easier than using a loyalty program that requires a separate card for payments or for rewards updates, according to Peppercoin. This also enables merchants to offer special bonuses. For example, to encourage peak purchasers to revisit during off-peak times, a merchant can provide extra incentives for making purchases at slower times of the day or week.
The Peppercoin software tracks all customer transactions and, for point-of-sale merchants, will automatically include information such as a rewards summary on the receipt. It can also trigger a coupon. By reporting the rewards on each receipt, or integrating that detail into the online purchase confirmation process, merchants can remind customers how much they appreciate their business.
For example, Toscanini’s Ice Cream, a popular Boston-area merchant, uses the Peppercoin to power its “Full Cup” program. The program encourages customers to sign up for a $25 prepaid card with a free medium drink or two-scoop ice cream cup or cone. So the customer gets an immediate reward and the merchant has a $25 pre-sale, which is placed on a MasterCard charge or debit card. When the customer depletes the card, he’s asked if he wants to renew. He doesn't need a separate rewards card or prepaid card to do this. The more often he reloads, the more rewards he earns.
Due to the combination of the simplicity and of the rewards, the Toscanini’s Ice Cream Full Cup customers are reloading 10 percent of the time, compared to a 5 percent industry average for prepaid card reloads, according to Friedman.
Other industry experts also see contactless payments as driving growth in non-cash payments in the near future.
“The biggest thing is non-cash contactless payment speed of services,” says Clyde Dishman, Director of Hospitality Industry Marketing for NCR. “The next step is the cell phone with the RFID chip inside so that all you have to do is wave your phone to make a payment.”
Though such options have been discussed for a few years, Dishman sees them coming closer to reality, and points to a current pilot program at the Philips Arena in Atlanta, where customers have the option of using RFID-enabled cell phones to pay at concessions stands. This program is still in the pilot stage.
Popular use of this technology is still a couple of years away, Dishman admits. Of more immediate impact for ISOs today is the popularity in some restaurants and other hospitality venues of using large screen displays.
Quick-service restaurants are using large screen displays of orders to help ensure customers confirm their orders and are looking at adding touch-screen displays to their drive-ups to enable customers to place an order that is automatically relayed to cooking area without need for a human to relay the information.
This builds on the growing popularity of self-service, according to Dishman. “Self-service devices can pay for themselves in as little as a year.”
NCR isn’t the only company that sees opportunities for ISOs in this type of equipment, says Rob Regan, Vice President of the Verifone’s hospitality systems group.
Customer activated systems enable customers to retain possession of their cards rather than handing them to QSR employees. With all of the press about payment fraud, this is an increasingly popular feature among customers, so it’s an important one for merchants, Regan says.
Part of the challenge is providing such a system at the drive- through, where QSR’s do 60 percent of their business, according to industry studies. So in May Verifone unveiled a new POS system with large, raised keys that enables customers to swipe cards themselves and enter PINs from the comfort of their vehicles. The technology is currently being piloted.
Large screen displays are also becoming increasingly popular at sit- down restaurants and other hospitality venues, according to Janet Yardley, Channel Marketing Manager and Carl Romagnoli, National Sales Manager, POS division, Sharp Electronics Corp.
The company is shipping more of these displays with their mid-range cash registers. These displays include touch screen capabilities to enable cashiers to quickly complete payment transactions, which are then tied to back-end systems (i.e., inventory, accounting).
As of late July, these cash registers, which can include payment cards as well as cash payment options, also have the Windows CE operating system, which is more reliable than Windows XP or Windows 2000, according to Sharp officials. The reliability (or lack thereof) of the cash registers/POS systems has been a big issue for merchants.
Independent grocers have their own concerns as merchants - primarily competing with the large national chains, according to Tony Van Seventer, Vice President of Marketing and Products for StoreNext Retail Technologies.
Until recently, these merchants relied on equipment and programs designed for a wider merchant audience without offering them any specific advantages, Van Seventer adds. But more recently, these merchants are looking for POS systems that will help differentiate themselves from other grocers.
Therefore, StoreNext worked with Hypercom, Igenico and other POS providers to enable independent grocers to sell gift cards at the checkout.
“This is an important revenue and opportunity for the grocer,” Van Seventer says. “He’s providing the shopper with a valuable service.”
StoreNext earlier this year unveiled software that supports the Blackhawk gift card program. Blackhawk markets gift cards for about 50 major brands, including Starbucks, Circuit City, Barnes & Noble and Major League Baseball. Blackhawk supplies more than 30,000 retail locations. Independent grocers and regional chains will be served via a combination of channels including wholesalers and direct sales.
Not to be outdone, the larger, national retail grocery chains are also trying to encourage more gift card purchases, says Bertrand Sosa, Vice President of Advertising Brand Development, and co-founder of NetSpend. The company is in the second year of a partnership with the Safeway grocery chain and supplies. Cards that are becoming increasingly popular for the underbanked and unbanked customers. Many of the unbanked don’t see the need for a financial institution - and therefore don’t have traditional credit cards - but still buy groceries, and can now buy gifts (the cards) at the same time. The NetSpend-supported cards can be activated at the POS terminal, Sosa adds.
Storenext is also providing independent grocers with technologies that help them steer customers to the lowest-cost (for the merchant) payment options, an increasingly popular technology, according to Van Seventer. “If a grocer does $200,000 in business every week, every percent he can save in payment charges saves him $1,000.”
Another way a merchant can save on payment fees is to keep fraud to a minimum. The threat of fraud is one of the concerns for patrons and owners of sit-down restaurants. At many of these restaurants, the patron hands the card to a member of the wait staff, who then takes it in the back to run it through the POS system. Such a procedure means high potential for fraud, so some patrons decline to pay with their cards.
To help alleviate this problem, Verifone earlier this year introduced a wirelessly enabled POS device that the wait staff member can take to the table to allow the patron to swipe the card himself. The device also enables the patron to calculate and add the tip based on a specified percentage (i.e., the popular 15 percent tip) or some other amount. The device, which was scheduled for full-scale launch in September, also includes a small printing module so that the customer can get his receipt immediately upon payment.
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