multi-retailer prepaid cards - edgar, dunn &...

Multi-retailer prepaid cards

July 2015 - Payment Briefing Webinar

© Edgar, Dunn & Company, 2015 Final V1.0

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Presenters contact details…

First Floor, Candlewick House 120 Cannon Street London, EC4N 6AS United Kingdom

Tel +44 (0)207 220 0406 Mobile +44 (0)7825 027 525

Fax +44 (0)207 283 1007

[email protected]

Mark Beresford Director


Tel +44 (0)207 220 0419 Mobile +44 (0) 7825 027519

Fax +44 (0)207 283 1007

[email protected]

Manika Singh Manager

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Contents

1. Prepaid card usage

2. What is a multi-retailer prepaid card?

3. Three market segments being served by multi-retailer prepaid cards

4. Example multi-retailer prepaid card products

5. Summary conclusions

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Prepaid can be used in a wide range of different situations to address lots of different business requirements

Consumer Public Sector Corporate

General Purpose

Youth

Gifting

Consumer Travel

Remittances

Online purchasing card

Campus

Government Benefit

Government Purchasing

Government Travel

Pension disbursement

Emergency assistance

Disaster relief

Corporate Purchasing

Corporate Incentives

Insurance Payout

Consumer Rebates

Corporate Travel

Payroll

Healthcare

Transit

Unbanked/underbanked

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Prepaid cards are very flexible in different use-case scenarios

However, they are often implemented to address a limited number of use-cases

What was a niche product has grown into a new product category called “multi-retailer” prepaid

Multi-retailer prepaid is a product that is capable of addressing multi-segments and supporting a wide range of use-cases within a limited network of points of acceptance

With an efficient distribution these products have successfully grown in the last 5 years

A growing segment of prepaid has been multi-retailer prepaid cards

An alternative perspective has been

evolving

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A multi-retailer prepaid card is a prepaid card that can be funded from a variety of sources

and redeemed at a limited network of retailers

What is a multi-retailer prepaid card?

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Multi-retailer prepaid cards is a growing area of prepaid that have performed very well in three specific market segments

Incentives & Rewards

Employee Benefits

Public Sector

Market segments

Multi-retailer prepaid cards

A summary of these three market segments and where multi-retailer prepaid cards are being deployed

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Very fragmented and evolving market

Served by wide range of providers offering a wide range of motivation, sales promotions, events management, big brand retailers and marketing companies are involved

Consumer brands also use incentives and rewards as a means of influencing consumer behaviour

Some of the typical employer to employee rewards include

Long service recognition

Thank you recognition

Employee of the year

Employee of the month

The employee benefits market can be organised in to three main mechanisms:

Core Benefits (e.g. Pensions, holiday, life insurance)

Flexible Benefits

Voluntary Benefits

The traditional products have been childcare vouchers, private medical insurance, dental care, cycle to work schemes

Today, employers want to improve the total employee benefits offering and this is driving market growth with new propositions

Prepaid coupled with retailer discounts are some of the most popular employee benefits

Governments worldwide are looking at prepaid cards as a means of addressing some of the challenges of expense management and disbursement of social benefits

Two areas where prepaid has made some inroads:

Government Procurement Cards

Helping Asylum seekers


Employee Benefits

Public Sector

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Sales promotions by big brand companies commonly use vouchers and prepaid cards as consumer incentives

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Marks & Spencer vouchers used as a sales promotion to incentivize consumers to apply for a life

insurance policy

Sky promoting a TV subscription and incentivizing consumers with M&S vouchers, a Prepaid Card or a Tesco gift card; the program

manager is Edenred (Incentives & Motivation) Ltd and the processor is Prepay Solutions for the MasterCard prepaid card

Source: Legal & General Insurance and Sky websites


UKGCVA stated that the use of

these prepaid gift cards and vouchers in sales promotion is estimated to be £515m per year*

* If 55% of the £5.2bn gift card and voucher market is B2B and 18% of that is related to sales promotions that uses retailer and multi-retailer gift cards and vouchers; therefore, the calculation is as follows; 55% of £5.2bn is £2.86bn and 18% of that is £515m

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Multi-retailer vouchers and gift cards have been used in the incentives and rewards market

They are typically branded MasterCard or Visa and can be limited loop/open loop products and most are reloadable

Some of the leading products include One4All Rewards (from the Gift Voucher Shop), Love2Reward (from the Park Group), BonusBond (from Grass Roots) and Incentive Award Card (from Edenred)

Multi-retailer vouchers and prepaid gift cards have evolved into a successful product category


Multi-retailer vouchers and prepaid gift cards

The One4all Gift Card is issued by Bank of Ireland Bank of Ireland is regulated by the Central Bank of Ireland

Our Gift Card is governed by the European Commission (Electronic Money) Regulations 2011 and the gift card funds are held in a segregated client fund account

Gift Voucher Shop is a subsidiary of An Post (the Irish Post Office)

One4All gift addresses the needs of corporate clients and include: Employee rewards and recognition

Incentives and motivation

Sales Promotions

The One4All brand has established a network of almost 100 different retailers (including holiday companies)

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Other multi-retailer vouchers and prepaid gift cards

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Sodexo and Edenred also have multi-retailer (or multi-store) products

Sodexo multi-retailer vouchers has around 60 to 70 retailer brands where the vouchers can be redeemed

Edenred Compliments Vouchers can be redeemed at approximately 110 UK retailer brands

Edenred also has a Chip & PIN reloadable prepaid card

All three products are used for employee rewards and in sometimes sales promotion activities

Edenred also has a MasterCard branded open loop prepaid card that aims to address the incentive and rewards market; it’s called Incentive Award Card


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Employee Benefits

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Two examples of leading prepaid cards in this market offering retailer discounts – as cashback / rebates

MySpree allows employees to earn 5% cashback at a wide variety of high street retailers and 3% at leading supermarkets

BIN Sponsor: Clydesdale Bank PLC

Processor: Prepay Solutions (partly owned by Edenred and MasterCard)

November 2014 Motivcom was acquired by Sodexo for £41m

Program Manager: Motivcom

Pure Card allows employees to earn 3% to 10% rebate at a wide variety of high street retailers leading supermarkets

Program Manager: Grass Roots Group

BIN Sponsor Raphaels Bank

Processor: FIS

Employee Benefits

Spree and Pure prepaid cards continued…

Clients include British Gas & Coca-Cola

Motivcom has negotiated between 12% - 15% commission or discount of products and services offered by the retailer1

3% to 10% returned to the cardholder (employee) as cashback

Network of 35 to 40 participating retailers

Other revenue streams include card provision, branding, cardholder support, top up fees, lost and stolen cards, blocking, program management, account on file, etc.

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Clients include Barclays & BMW

Grass Roots has negotiated between 12% - 15% commission or discount of products and services offered by the retailer1

3% to 10% returned to the cardholder (employee) as cashback

Network of around 55 participating retailers

Other revenue streams include card provision, branding, cardholder support, top up fees, lost and stolen cards, blocking, program management, account on file, etc.

Grass Roots is one of the top agencies in the UK

Global marketing services conglomerate WPP Group owns 48% of the Grass Roots

Motivcom Grass Roots Group

Employee Benefits

Note 1: Some retailers will pay commission for new customers others will offer a discount on purchases

Multi-retailer vouchers and gift cards

Park Group plc, is one of the UK’s leading multi-retailer voucher and prepaid gift card businesses Offering (B2B) corporate gift and Christmas savings

programs

The main corporate client requirements that Park Group and many others address are: Employee benefits

Employee rewards and recognition Incentives and motivation Sales Promotions

The Love2Shop brand has established a network of 130 different retailers (and holiday companies, e.g. Thomas Cook, Virgin, Airtours, Kuoni, Cosmos, and Disneyland Resorts)

With the Flexecash prepaid card, Park Group, has created a multi-retailer proposition that can be branded in the corporate client’s logo and be accepted across the love2shop network of retailers

Park Group operate under its own e-Money Issuing permission as regulated by the Financial Conduct Authority

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Employee Benefits

An example of a company branded discount card

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Public Sector

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GPC is used by Government as a payment card and is the preferred method of purchasing and paying for low value goods or services There are many benefits to using GPCs, such as reducing procurement processes times and supports the Government’s

prompt payment initiative for Small and Medium Enterprises

The card allows cardholders to make purchases within predefined limits Unlike a traditional credit card, the whole outstanding balance is payable by the government department at the end of

the account settlement period

Some card providers offer rebates based on the total level of spend across all cardholders

GPC can block certain Merchant Category Codes (MCC) These codes identify the merchant by their business line and provide a way to identify and categorise reportable

transactions and can be used for blocking purchases for specific product groups or functions (e.g. can not buy fuel or withdraw cash at an ATM)

The product is offered by American Express, Barclaycard, JP Morgan and RBS (and other smaller issuers) through the Central Government GPC Framework

Government Procurement Card (GPC) Public Sector

Government Procurement Card (GPC) continued…

The latest report from the National Audit Office (NAO) stated that Central government spent £322 million using Government Procurement Cards in 2010/11, and over £350 million in 2011/12

According to the NAO using the GPC could provide a potential savings in procurement and expense administrative costs of around 35%

The card providers also able to provide: Management Information reports for transparency and

accountability

Meets prompt payment legislation with suppliers being paid within 10 days

Spending limits and restrictions can be set, giving the government department better control of spend

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Public Sector

Asylum seekers prepaid card1

The so called government “Section 4” support is given to refused asylum seekers who are destitute and are either waiting a further decision on their claim, or can’t immediately return to their country of origin due to circumstances beyond their control

4,831 asylum seekers (end of 2013) and their dependents where receiving Section 4 support

A specific Asylum seeker card from Sodexo is given to them with a preloaded amount of £35 a week (Azure card) The Azure card is only accepted by a few retailers and

can only buy food, essential toiletries, clothing and credit for mobile phones

There are approximately 7400 active Azure cards with around £13.7m transactions per year

The Card is issued by Raphael bank as the BIN sponsor to Sodexo, who manage and administer this scheme on behalf of the Home Office of Her Majesty’s Government

The current system of supporting some asylum seekers has come under a lot of criticism and there is often an associated social marginalization of the users of the card

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Public Sector

Your AZURE CARD can be used at the following:

National retailers

Charity shops

There may also be local retailers in your area where you can use your Azure Card (“your Card”). Please check with your Accommodation Provider.

CONDITIONS OF USE

1. Once activated, the Azure Card (hereafter “the Card”) can be used at any outlet of the above stores in England, Scotland, Wales and Northern Ireland, or at other stores as advised by Sodexo or the Home Office.

2. Your use of the Card will amount to your irrevocable acceptance of these Conditions of Use. 3. The Card is a prepaid card. It is not a credit, debit or cheque guarantee card. 4. The Card cannot be used to access cash at any time, including via “cashback” schemes or ATMs. 5. If you are single (i.e. you have no dependants), you will not be able to carry over more than £5 balance on

the Card at the end of each week unless otherwise stipulated by the Home Office. Each week ends at midnight, Sunday.

6. The Card can be used to purchase any goods and services offered by the above stores (or other stores as advised by Sodexo or the Home Office) except store/gift cards of any kind, vehicle fuel, tobacco products or alcohol. All other items are available for purchase with the Azure Card at participating retailers.

However, restricted goods are subject to change by the Home Office at any time. 7. The balance on the Card can be checked on 0800 028 5364 (available 24hrs). Calls are free from landlines.

Any other enquiries regarding the use of the Card should be directed in the first instance to the Sodexo Careline on 01276 687 099 (open 09:00-17:00hrs, Monday-Friday).

8. You must regard the Card as cash. If it is lost or stolen, or you suspect fraudulent use, you must contact your accommodation provider/housing officer. A replacement card will be ordered, and you will be issued with temporary support. Such temporary support is provided by your accommodation provider/housing officer, not

Sodexo or the Home Office. You may lose all or part of the value on the Card that has been debited because of theft or fraud.

9. The Card is issued by R.Raphael & Sons to Sodexo , who manage and administer this scheme on behalf of the Home Office of Her Majesty’s Government. Sodexo is the owner of the Card.

10. Sodexo may process, retain or transfer your personal data within its groups of companies or to third parties solely for the purpose of managing and administering the Card.

11. The Home Office reserves the right at its absolute discretion, and without reference to you, to give instructions to Sodexo to amend these Conditions of Use, and to amend or cancel all or any benefit outstanding on the Card at any time.

Check the balance on your Azure Card before you go shopping. Call 0800 028 5364 (24 hours; free from a landline).

You cannot use the Azure Card to buy alcohol, tobacco, vehicle

fuel or store/gift cards All other items at participating shops can be purchased (including mobile phone “top-ups”) so long as you have sufficient funds. No

credit will be given at any time.

Note 1: Approximately 8 local authorities have used prepaid cards for asylum seekers – these is outside the Azure card program – for full list see the appendix

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Multi-retailer prepaid continue to performed very well in these three market segments


Employee Benefits

Public Sector

Market segments

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Merchant Discounts via prepaid cards and vouchers for employees can be available through a network of preferred merchants Examples include: Spree, Pure, Flexecash, and other multi-retailer prepaid card solutions

Some of these employee benefits programs that operate through an open loop (or limited loop) prepaid card can also be used as an incentive and reward feature where the employer can “top-up” or load the prepaid card with value for the employee

Where incentives and rewards that are funded by the employer, such as the BonusBond from Grass Roots, or the InstantRewards from Reward Gateway, or the Incentive Award Card from Edenred, are some of the leading providers in the UK and have ambitions to grow internationally

Multi-retailer prepaid cards are easy to implement and maintain; there are a variety of options in the market which include: Having your own E-Money permission from the Financial Conduct Authority (e.g. the Park Group)

Working with a BIN sponsor (e.g. Grass Roots)

Working with Visa or MasterCard using a limited private network based on merchant identification to limit the usage of the card at certain retailers (e.g. Sodexo and Edenred)

Multi-retailer prepaid cards are gaining ground over general purpose prepaid cards because the distribution arrangement through employers and corporates is much more efficient

Summary Conclusions

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