2008 Best in Payments Awards

Cards&Payments, June 1, 2008 - The concept of issuing debit cards to access customers’ demand deposit accounts at other institutions has been floating around for some time. But to actually get such so-called “decoupled” cards into the market, it took the foresight and ingenuity of someone looking for a creative way to win over consumers by melding all their payment options–debit, credit and rewards–into one product and making the payment process simple.

For spearheading such an effort, Daniel J. Eckert, senior vice president, payment products, card and retail services at HSBC-North America Inc., has won the 2008 Cards&Payments Best in Payments Outstanding Payments Executive award.

“Ideas are a dime a dozen,” says Eckert, who teamed with Tempo Payments Inc. to launch a decoupled, multi-purpose card pilot. “But exercising ideas in practice enables you to understand what you have.”

What HSBC and Tempo have in their ongoing decoupled-debit pilots in New Jersey and Indiana has yet to be definitively determined, although they say consumers are enthusiastic about the card.

If their idea succeeds, and Capital One Financial Corp. finds success with its scaled-back decoupled-debit project (see News story on page 10), it could revolutionize the debit card business, according to many in the industry.

That would be quite an achievement for Eckert, 34, who is relatively new to the payments field.

Eckert got his first real exposure “to the full depth and breadth of the U.S. payment system” while working for Bank One Corp. (now JPMorgan Chase & Co.) seven years ago. At the time, he was with the firm’s global treasury services group, designing and developing new products to help financial-services clients meet their consumer and corporate payment needs. Part of his job involved facilitating payments for such major clients as Ford Credit and Harley Davidson Financial Services.

“It was kind of a fun time to be introduced to payments,” he says, noting that for the first time check payments were beginning to decline. That is when Eckert learned the value of giving consumers flexibility in their payments choices.

When the former U.S. Marine Corps officer joined HSBC three years ago, he was asked to explore ways the bank could distinguish itself from other credit card issuers. “The white board was completely blank,” he says. “We had no preconceived notions.”

So he listened to customers to learn what platforms could be developed to meet their needs.

“Through that research, we clearly were starting to see another emerging trend: Consumer payment preferences were continuing to shift from paper-based instruments ... to debit cards,” says Eckert.

That was a new direction for the company, but it was one Eckert believed HSBC should pursue because he recognized that consumers wanted more flexibility in their payment options. They also wanted to reduce the amount of plastic they carried with them and to consolidate their rewards programs, Eckert says.

To meet those consumers’ desires, Eckert and his team at HSBC turned to the decoupled debit card. However, Eckert wanted more than just a card detached from individuals’ primary banks.

“How do you create a magnetic stripe device that allows for a customer to have all available payment-access methods available to them on one card”–debit, rewards and credit? he says. “We came up with a multifunctional mag-stripe card that allows consumers to take control of their payments, and then we set out to build it.”

Eckert believes innovations in the payments industry will continue to focus on bringing value to the stakeholders and convenience to consumers.

“You’ll see a lot of folks say they’re doing that, but the market will dictate where the evolution takes us,” he speculates.

Eckert says he enjoys developing products that consumers use every day. “This is a business that you can explain to your grandma,” he says.

BEST IMPLEMENTATION:

Chase Paymentech

When Chase Paymentech Solutions LLC won a bid in April 2007 to implement plans by Canadian restaurant Tim Hortons to launch a contactless-payment system, the Dallas-based merchant processor knew it was in for a sprint.

The franchise restaurant chain wanted all card readers and equipment installed and the project operational by October. Not an easy task when one considers that, as Canada’s largest quick-service restaurant chain, Tim Hortons has more than 2,700 outlets throughout Canada (and another 350 in the U.S. that were not part of the contactless project).

Tim Hortons, best known for its coffee, donuts and sandwiches, wanted to go contactless to enhance security and to increase transaction speed at checkout and at its drive-through lanes.

“It was a speedy job, both in implementation and negotiating, for when they wanted it up and working,” says Paul Browne, Chase Paymentech senior vice president of operations. “And a deal like this takes lots of discussion.”

Chase Paymentech completed the necessary groundwork and equipment installation in late October, meeting the chain’s time frame. The diligent work has earned Chase Paymentech the Card&Payments 2008 Best in Payments Best Technological Implementation award.

The processor also scored high marks with the restaurant. “We got it done very, very quickly, which was pretty remarkable,” says Rachel Douglas, a Tim Horton’s spokesperson. “It was an aggressive implementation strategy, and Chase definitely delivered.”

Chase Paymentech divided the project into two phases. First it had to get franchisees on board. Then it needed to install the equipment and get the project operational.

In the spring of 2007, after discussions with Tim Hortons and MasterCard Worldwide, also a participant in the project, the merchant processor began enrolling franchisees. The company sent marketing and enrollment kits to 2,200 of the restaurants (the other 500 are part of malls and other operations). Included in the kits were documents the franchisees had to sign to register their participation. Chase Paymentech also provided a checklist for what needed to be done, information on the readers and cards, a newsletter to keep franchisees up to date, and notification of deadlines for stages of the project.

Chase Paymentech gave the franchisees three weeks to fill out the necessary paperwork. “They were very receptive,” says Browne, and 92% completed the paperwork on time. The others came in shortly thereafter.

Installation of VeriFone VX570 terminals and SC 5000 PIN pads and VivoPay contactless readers began at the end of June. Chase contracted with Maxwell Technology of Belleville, Ont., to install the approximately 6,000 pieces of equipment.

More than 300 individuals, “a small army,” according to Browne, participated. Most were installers, but others were set-up workers, project managers, equipment technicians, and legal, sales, and marketing personnel.

Installation hours were restricted because Tim Hortons does brisk business around breakfast and lunch. The goal was to outfit about 150 restaurants per week over the three-month installation period.

The job was made easier because the restaurant chain is detail-oriented, and its staff members “really understood what they wanted,” says Browne.

“We’re starting to see a lot of buzz around this product,” says Browne. “It could have been challenging, but we overcame all the potential problems. And we were able to meet all the demands of this aggressive project.”

This year’s runners up were...

- Vivotech—VIVOnfc Mobile Phone Payment Infrastructure software

- Pulse—DebitProtect neural network

- IP Commerce—ChasePaymentech’s integration to IP Commerce platform

BEST MARKETING:

MasterCard Worldwide

MasterCard Worldwide belted a home run last year with its marketing campaign, MasterCard Presents MLB Dreams.

Building upon MasterCard’s existing affinity relationship with Major League Baseball, the initiative gave cardholders a chance to win a free week with their favorite Major League team. During the campaign, cardholders vied for the chance to watch games from VIP seating–both at the club’s own stadium and on the road–observe batting practice, and meet personally with team members and retired stars.

For each transaction using a MasterCard from July 1 through Sept. 30, the card brand entered cardholders into a pool to win one of three MLB Dream prizes of the week with the team of their choice. MasterCard awarded a fourth and similar prize through its priceless.com online promotion based on music videos cardholders submitted on their favorite big league teams.

MasterCard also was a winner, as transactions rose significantly during the contest period, the card brand says, declining to provide specific transaction data. And its MLB Dreams initiative won the Cards&Payments 2008 Best in Payments Best Marketing Campaign award.

MasterCard integrated two other big players into the campaign, Bank of America Corp. and Best Buy Co. Inc. The card brand provided consumers one entry per transaction made using their MasterCards, or two entries if they used their cards at Best Buy during the three-month contest. Cardholders also received double entries for purchases made with a BofA MLB team-affinity card.

MasterCard and BofA are Major League Baseball sponsors. The bank issues 30 team-logo debit MasterCards. BofA previously issued credit cards with team logos.

The MLB Dreams campaign not only increased cardholder transactions by double digits compared with the same period the previous year, it also burnished the company’s image, based on tracking algorithms MasterCard uses, according to Cheryl Guerin, MasterCard vice president, promotions and interactive.

“This program gave our reputation a tremendous lift,” says Guerin.

MasterCard officials are particularly pleased the marketing campaign reflected positively upon the company because it was conduc during a season in which baseball’s own image was taking a bashing from the sport’s steroid-use scandal.

Another benefit from the promotion is that it enhanced awareness of MasterCard among consumers, according to MasterCard executives.

MasterCard and the other sponsors promoted the MLB Dreams contest online, in bank branches, on ballpark signage, through direct mail, on television and with outdoor advertising. Some 131 card issuers participated in the marketing program.

The promotion was a continuation of the company’s use of Major League Baseball as a marketing vehicle. That relationship also involved the selection of an All-Century Major League Team in 1999 and a Memorable Moments in Baseball History promotion in 2002.

MasterCard believes leveraging sponsorship of baseball with consumers’ love of the game and their home teams will generate greater card usage.

“They are highly passionate about their team,” Guerin says of baseball fans. “We’ll continue to look to baseball. They’ve provided the greatest return on investment for integrated promotional campaigns of all our marketing campaigns.”

This year’s runners up were...

- Chase Paymentech Solutions LLC–Verizon Merchant Services Powered by Chase Paymentech

- Visa Inc.–Check card versus check TV ad

- Aloha Petroleum Ltd.–Image change and value-proposition campaign

BEST NEW PRODUCT:

Discover Financial Services

Discover Financial Services likes to look for ways to distinguish itself from rival card companies. Last year it found another way to do so, launching a card that helps consumers with outstanding card debt to pay off their balances in a consistent and more-timely fashion.

Discover’s purple Motiva Card offers customers with revolving balances a bonus of one month’s interest back each time they make six consecutive on-time payments.

The initiative earns Discover the 2008 Cards&Payments Best in Payments award for Best New Product.

“We feel [Motiva] clearly demonstrates how we’re doing things differently as a company.” says Kelly Tufts, Discover director of new product marketing.

Motiva’s concept certainly has the potential for widespread appeal. Nearly 50% of U.S. consumers revolve their credit card balances, meaning they do not pay them off in full each month, Cards&Payments research shows (C&P’s Exclusive Bankcard Profitability Study and Annual Report, May).

Discover conducted research to determine which types of services or products might appeal to revolving cardholders. “We’re always looking and talking with customers,” says Tufts. “You learn from customers what they want, and then you present them with ideas.”

The research found that revolvers are interested in rewards that are meaningful, according to Tufts.

Discover developed the plan to give a month’s interest back to customers as both a reward and as an encouragement to cardholders to pay off their balances in a timely fashion. “The interest back can help them achieve their goals,” Tufts suggests.

The card company says it is encouraged by customers’ interest and participation in the Motiva Card interest-back program, although it would not disclose how many customers the incentive plan has helped encourage to make punctual payments.

“We’re meeting our projections, and our customers are very excited to get a reward for something that’s so easy to do,” Tufts says.

Discover applies the one-month interest payback program only to customers with unpaid balances. Cardholders who pay off their credit card bills on time are not eligible.

Cardholders can earn the interest-back bonus, which Discover initiated in March 2007, twice a year, if they make punctual payments on their bills. Those benefiting from the so called “pay-on-time bonus” also are eligible for Discover’s regular cash-back program that pays a percentage – usually 1% – of all purchases made with the card.

The interest that revolving cardholders owe is listed on their monthly statements. The program is flexible in that it enables cardholders to pay off whatever amounts they want during each of the six months leading up to the interest-back reward, as long as they pay at least the monthly minimum amount due on their bill. The key is not how much is paid but that the payment is made on time.

Discover reminds customers by e-mail when payments are due. If a Motiva cardholder wants to pay but does not have access to a computer, Discover waives its $10 fee for using a customer-service representative to pay by phone.

Consumers may use the Motiva Card to make everyday purchases. But the card company targets especially those individuals who maintain a revolving balance.

Discover, of course, did not launch the Motiva payback program just to be magnanimous. “We definitely saw this as an opportunity to bring new consumers to Discover Card products,” says Tufts.

This year’s runners up were...

- Monitise–Mobile Banking and Payment Solutions

- MasterCard–smartdata.gen2

- GarantiBank–Bonus Trink Sticker

EDITOR’S CHOICE AWARD:

Heartland Payment Systems

To usher in the 2007 fall semester at Slippery Rock (Pa.) University, Heartland Payment Systems introduced a student ID card system that includes a separate contactless chip that students can attach to their mobile phones. The system enables students to use their phones or magnetic stripe ID cards to purchase all campus services, including tuition. Many local merchants also accept the school’s proprietary contactless payments or ID cards.

For its innovation and implementation of the Slippery Rock student ID card system, known as Give Something Back because of a charitable gift component, Heartland is the winner of the Cards&Payments 2008 Best in Payments Editor’s Choice Award.

Slippery Rock’s president, Robert Smith, inspired the move to the contactless system, which also still supports magnetic stripe card transactions. Smith asked Heartland, which processes card transactions at 965 schools and universities and has held the Slippery Rock account for a decade, if it had a product to enhance the university’s existing ID card.

Robert Carr, Heartland president, had been considering contactless card applications and came up with the idea of using contactless technology tied to a cell phone, a device highly popular with students.

Heartland recently acquired two companies whose core businesses fit right into what the company would need for its Slippery Rock project. One, Debitek, manufactures card readers for vending machines, washers and dryers, and copiers. The other, General Meters, runs campus programs for ID cards, meal-plan management and building access.

Heartland has its own software for credit and debit card terminals, so the company had all the parts necessary for such an initiative.

“Our motivation is to develop and build additional merchant relationships and sell them more products,” says Barry Welsch, Heartland director of special products.

Welsch says the company believed it made sense to go beyond mag-stripe cards and adopt a device that consumers might one day use widely for payments and to access various services and products – the cell phone and its radio-frequency identification capabilities.

Last August, the school issued the new ID cards to 8,500 students and 1,000 faculty and staff. About 4,500 of the cards support contactless payments.

Most cell-phone manufacturers have yet to add contactless technology to their devices. So Heartland issued an adhesive contactless tag, just larger than a postage stamp, that students could stick to their phone or to a key fob.

About 3,000 campus-ID cardholders tie the cards to prepaid accounts. Parents can go to a special Web site to transfer funds to students’ card accounts.

Heartland rewards participating merchants by reducing the interchange rate to 1.5% of the sale. The interchange rate on a typical bankcard can approach 2%.

More than 30 merchants in the Slippery Rock community accept the cards, up from an original six. They include a supermarket, some restaurants and hair salons, and a towing service. The school lists the participating merchants on its Web site.

Each time the card is used off-campus, Heartland donates 0.5% of the purchase price to Slippery Rock. Students and other cardholders also can designate up to 1% of purchase price as an added donation to the school or another charity.

The Give Something Back charitable initiative came from Carr’s personal interest in philanthropy and student scholarships. “The underlying goal is to introduce them to the concept of giving back to the school,” says Welsch. “They can keep the cards when they graduate.”

Heartland issues the cards and phone chips through its own private label. By avoiding the branded card networks, it is able to keep down processing costs and thus charge merchants the lower interchange fees. (c) 2008 Cards&Payments and SourceMedia, Inc. All Rights Reserved. http://www.cardforum.comhttp://www.sourcemedia.com