The conversations ISOs and merchant level salespeople (MLSs) have with small mom-and-pop merchants about gift card programs should be about marketing, not price, according to Michael Hursta, Vice President of First Data Prepaid Services.
"Gift card is not a payment product; it's a marketing product," Hursta told SellingPrepaid at the 2011 Prepaid Expo USA held in Orlando, Fla. "And so what an ISO needs to be thinking about when they go in to have a conversation with a small merchant about gift is that they're not in there talking about rates, basis points and how much they are going to pay in interchange."
Instead, the conversation should be focused on how gift card programs help businesses grow through increased foot traffic and brand awareness. "[ISOs] need to change the mindset of how they come into that conversation, because if they think it's just another payment type, they're having the wrong conversation," Hursta said.
Dan Farrell, Vice President of Card Products and Services at First Data, advised ISOs and MLSs to view gift cards as "top-of-mind" marketing tools for merchants. "Every gift card that is out there in the wallet is an advertising impression," he said. "And this is where we think about marketing.
"These companies look at the money they'll spend in advertising impressions and those impressions may go past someone's face once versus actually in their wallet. Every time you open it you actually see it. So there's a real soft value that a small mom-and-pop or an ISO has a hard time embracing because they haven't looked at gift cards from that perspective."
Hursta said First Data is leveraging its experience in the prepaid card sphere – going back to 1995, when it launched the first closed-loop gift card program at Blockbuster Inc. – to become a consultant to its retail clients. It will bring to bear its breadth of proprietary information, some of it released in its monthly SpendTrend analyses, to inform merchants on how to more effectively market prepaid card programs.
"We're just responding to the demand we see," Hursta said. "We are at a point now where it's not just can you make this work, but how do you help us make it work as well as possible."
To further that goal, First Data has made strides recently. The newest addition to its eGift Social marketplace on social media giant Facebook is Dairy Queen. The marketplace allows Facebook users to gift friends with virtual cards from participating businesses, including Cold Stone Creamery and Joe's Crab Shack.
In March 2011, First Data launched mVouchers, virtual coupons funded by merchants and designed to deliver discounts, incentives and rewards to consumers via mobile phones. The acquirer also reported in March it was granted a patent for technology that allows merchants to activate packs of gift cards with one scan at the POS, thereby saving time at checkout. Hursta and Farrell see it as primarily a business-to-business implementation.
"We've got companies that want to provide benefits to their employees, maybe to salespeople, maybe to vendors of theirs, and it makes sense for them to purchase cards like this in a mass quantity," Hursta said. "Walking into a store, any store, with a stack of 25 cards and have each one swiped individually, that's normally not a good experience for anybody."
When implemented, the web-based technology will allow corporations to purchase bulk quantities of prepaid cards directly from retail stores. Farrell offered the example of an ISO that wanted to hold a sales meeting for 50 MLSs. "I can literally go down to my Starbucks potentially or a McDonalds, even a restaurant, and say I need 50 cards, whatever the denomination is, right there at the store," he said. "I don't have to call the corporate office and wait for [the cards] to be shipped to me."
Hursta noted First Data operates closed-loop gift card programs in 41 countries and has made strides in the general-purpose, open-loop reloadable card category. He said First Data is the world's largest processor of payroll cards through its Money Network Payroll Distribution Service, which is used by such retailers as Wal-Mart Stores Inc. for its unbanked employees.
"We're seeing a great adoption rate from employers around the payroll products," Farrell said. It's the ultimate win-win, he added, as unbanked employees save money in not having to use check cashing businesses to convert paper checks into usable cash. Additionally, employers save on the expensive proposition of check cutting and distribution. "And for companies that don't do direct deposit, managing that business, we can make a lot of that go away," he said.
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