A purveyor of choice

Independent Sales Organizations (ISOs) and merchant level salespeople (MLSs) want to differentiate themselves from the competition. They do this by offering merchants better rates, better customer service, better payment solutions and value-added services that sweeten deals. Merchants, meanwhile, want to build a base of customers who return to their POSs - often. A mutually beneficial solution for ISOs and merchants resides in gift and loyalty card programs.

Smart Transaction Systems Inc. creates customized gift card programs for small businesses around the world. While gift cards might not be the most personal of gifts, they are often instrumental in strengthening relationships between consumers and businesses. STS strives to customize its gift card programs to adapt to the varied needs of companies, believing that tying loyalty programs to gift cards enhances the consumer experience.

Ray Clopton, President and founder of STS, has been in the payments industry for 22 years. He began doing product development at Boulder Bankcard Processing, which was subsequently acquired by Nova Information Systems Inc. (now Elavon Inc.) in 1994. In 1996, he left the Nova subsidiary and established Clopton and Associates.

"At Clopton and Associates we had been doing consulting on new product development for clients like Visa and a lot of banks and ISOs," Clopton said. "So, we were essentially in the business of producing and releasing new products. We saw some opportunities in stored-value cards, and Smart Transactions Systems was launched from that."

The two I's

Independence and individuality are integral components of STS' business philosophy. "A lot of the folks here have worked for big companies over the years and prefer the independence and the latitude that you have working for a small company," Clopton said. "Whether it's allowing people to bring their dogs to work or flexible schedules, we believe making it a fun place to work for employees is as important as bringing innovative and useful products to our merchants."

Sarah Bouricius, STS Marketing and Communications Manager, added that employees at the Boulder, Colo.-based company wear many hats, allowing Smart Transaction Systems to keep all of its certification and software development in-house.

"We have a small, but brilliant R & D [research and development] department," Bouricius said. "Because of our size, we are able to launch new products quickly and customize our solutions. We're also able to work one-on-one with customers to make sure that they're getting the product that works best for them.

"A lot of companies offer cookie-cutter solutions that don't fit perfectly with what the merchant has envisioned. If a merchant comes to us with something they've thought of, we rarely have to say that we can't do it."

First contact

In its early days, STS found it challenging to focus on just one technology, and to avoid creating products just for the "gee whiz" factor, Clopton said. The company began with contactless chip card (smart card) applications intended for campus environments and football stadiums. But Clopton and his colleagues quickly realized there were greater opportunities in stored-value gift card programs.

"What we're known for in the market is being a gift and loyalty provider that has the ability to customize and improvise solutions for customers that need something unique," Clopton said. "We've had a lot of success with more specialized solutions where we've been able to customize programs for specific industries."

STS designs and implements programs for sports arenas, entertainment venues and ski resorts, among other markets. Many STS customers start out with gift card programs and then upgrade to combination gift and loyalty card programs, Clopton said. Customers don't need to download additional software or buy new cards to upgrade. One of STS' popular program combinations involves storing a cash value and a reward balance. When users reach specified point values, the points convert to cash back on the cards.

STS works closely with ISOs. "Our experience has been that if you work with ISOs to identify their strengths, and help them find their niche - be it a specific point of sale or specialized product such as text messaging - that they can be very successful," Bouricius said. "They can take it and run with it. We've also seen a great success with ISOs in converting merchants from other gift card programs."

In spite of the recession, STS has reported continued growth in targeted sectors. "About two-thirds of our new business is independently owned restaurants with one to three locations," Clopton said. "It seems like restaurants tend to weather recessions a little better than other industries do."

The company also noted that its international partnership program is expanding in Australia, South America and South Africa. According to Clopton, STS has grown steadily year over year, without venture capital, and now boasts over 4,800 merchant customers in North America and Europe.

Applied technology

Clopton said STS has made a number of important moves that spurred the company's evolution. In 2008, it adapted its services to be compatible with a wider range of hardware, and that effort appears to have paid off.

"We've dramatically expanded the number of POS systems and terminals that we're compatible with, so that's allowing us to expand into some niche markets as well," Clopton said. That means STS customers don't have to find another gift and loyalty card provider if and when they switch processors.

In addition to advances in compatibility, STS' programs are now certified to run on all wireless terminals offered by Verifone and Hypercom Corp., Clopton noted. What is more, STS formed partnerships with three major mobile commerce and marketing companies. These partnerships, he added, have increased loyalty program opportunities, allowing STS' customers to build an opt-in list of customer cell phone numbers in order to send promotional text messages.

"We see a lot of power in joining text message mobile marketing capability with loyalty programs," Clopton said. "With text messaging, restaurants can send out incentives in real-time: 'We're slow tonight, so let's send a message out to loyalty customers letting them know we'll offer a two-for-one deal tonight.'"

STS developed Ticket Mover, designed for sports and entertainment venues and concert halls. With Ticket Mover, frequent patrons earn points for attending concerts. In turn, venues send patrons text messages the night before concerts to offer discounts to loyal customers to help fill empty seats.

"What we're building on is the real-time aspect of text messaging," Clopton said. "Text messages reach people wherever they are and have proven to be a much more effective promotional method than e-mail in terms of the number of people that actually read the message."

Bouricius added that text message promotions are a personal approach to reaching customers.

"When customers sign up, they really do want to get promotions from the companies that they frequently visit," she said. "Text messaging makes for a better consumer experience with loyalty."

Clopton said aggregators working with phone carriers like Verizon and AT&T enforce the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 designed to protect mobile phone users from receiving spam. "The cellular phone companies are actually pretty serious about making sure that that channel doesn't get spoiled by spam-type activities," Clopton said.

Textuality

STS' latest offering is Text-2-Transact, which allows merchants, such as businesses with delivery fleets or mall kiosk vendors, to process gift card transactions at the POS using text messages.

Take pizza delivery, for instance. When drivers deliver pizzas to residences, customers provide gift card numbers. The drivers enter the numbers into their cell phones. "Instead of using a wireless terminal, for example, the delivery guy would actually be using his cell phone as a terminal," Clopton said.

Delivery drivers then receive approval numbers, remaining balances on cards and normal receipt information from STS.

Customers do not receive paper receipts, but they can check gift card balances online, via text message or by calling a toll-free number, Clopton said.

The right touch

While smart card technology has been around for decades, the adoption of contactless in the United States has been slow.

"It's not a great fit for every type of business, but we've seen a lot of success with transit systems and corporate and student campuses," Bouricius said.

"Coffee shops have greatly benefited from contactless technology because speed is such an important aspect of their business."

If contactless cards are not ideal for every retail environment, the same can be said for gift and loyalty card programs - one size does not fit all. STS' loyalty programs are divided into three broad, easy-to-understand categories: solutions designed around Web sites, text messaging and cards.

But merchants aren't limited to choosing from just one of those categories. "If merchants have other ideas, we'll work closely with them to accomplish their goals," Bouricius said.

In today's economic climate, STS believes customer loyalty is the name of the game. Gift and loyalty card programs can be a timely value-add for small businesses that need to increase foot traffic, and thus, sales.

For ISOs and MLSs focused on small merchants, it might be time to arrive bearing the gift of choice.

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