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Table of Contents

Lead Story

Trade associations at your service


Industry Update

ETA says down with proposed CFPA

Cambridge researchers find EMV flaw

TSYS drives hybrid card


Research Rundown

Selling Prepaid

Prepaid in brief

Finding your most valuable customers

Robert Christiansen
ARM Loyalty

The crux of cash back on gift cards


Follow Wendy's for a winning combo

Biff Matthews
CardWare International

Let's be smart about smart phone payments

Paul Rasori


Street SmartsSM:
Deal or no deal?

Jon Perry and Vanessa Lang
Merchant Services Inc., Fort Worth, Texas

Top 10 mistakes in PCI compliance

John Bartholomew

The nuances of the question, Why?

Jeff Fortney
Clearent LLC

Seven rules for MLS sales success

Jeffrey Shavitz
Charge Card Systems Inc.

Developing a relevant, compelling value proposition

Peggy Bekavac Olson
Strategic Marketing

Company Profile

ControlScan Inc.

New Products

Self-branded smart phone terminal

App Ninjas Inc.

ACH through and through

ACH Processing
ACH Federal


Attitude affects everything


10 Years ago in
The Green Sheet


Resource Guide


A Bigger Thing

The Green Sheet Online Edition

March 08, 2010  •  Issue 10:03:01

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Finding your most valuable customers

By Robert Christiansen

It is an accepted axiom in the loyalty space that by rewarding your best customers, they become your most vocal champions. Therefore, finding them is critical to a successful loyalty program. Without knowing who your best customers are, and more importantly their behaviors, you may be rewarding the wrong customers and encouraging unprofitable behaviors.

Consider the general purpose reloadable (GPR) card market. This dynamic and competitive market is growing at double digit rates, and all industry experts agree that growth will continue well into this decade.

In this market, identifying your best customers can be quite challenging. GPR cards work similarly to debit cards with bank accounts. They allow for direct deposit of paychecks, as well as cash loading through retail locations.

If they are branded Visa Inc., MasterCard Worldwide or Discover Financial Services, they allow for signature debit purchases at millions of locations. Many GPR card programs run on debit networks, like First Data Corp.'s STAR and MasterCard's Cirrus networks, which offer PIN-based purchases and ATM access.

GPR cards are flexible financial tools serving a rapidly growing international market. With so many moving parts, how do you identify the best customers and their profitable behaviors?

Program revenues

GPR cards are spending vehicles. Program managers generate revenue with them via transaction fees and interchange. Unlike issuing banks, program managers do not profit from deposit float. As a rule, the more money loaded (deposited) on a customer's prepaid card, the more profitable that customer is to the program manager.

Interchange is 140 to 150 basis points. ATM and PIN fees are typically collected per transaction. But, for most programs, the monthly maintenance fee is the single largest fee collected. However, collecting maintenance fees can be elusive. Cardholders often draw the balance on cards to near zero, making collection of the fees problematic. Without knowledge of deposit behavior, program managers are in a difficult position as to the profitability of the cardholder.

Card program costs

For purposes of identifying your best customers, do not consider marketing and fulfillment costs as part of our calculation. (That's the subject of another article.) When determining your best customers, consider program costs in three areas: processor, issuing bank and debit network switch fees. Let's briefly consider each area.

Your best customers

Now that we have our revenue and cost per month per card, we can determine the gross contribution. By subtracting cost from revenues over the life of the cardholder, we determine our best customers. This group generates the high profit per month and often carries the load for all other cardholder groups. Here are some key questions to ask yourself about the behaviors of your best customers:

Your database holds all these answers and many more. The simplest of transaction data can produce amazing insights into the behaviors of your best customers. Transaction amounts, dates, locations and times of day are the building blocks to identifying this most important group.

Find and conquer

Identifying your best customers is a powerful and satisfying activity. The process is absolutely necessary for a successful loyalty program. Be sure to document the steps you take to discover your best customers - you will need to repeat the same process each month. The process will become easier each time you do it. And you will gain critical insight into the fluctuations of this important customer group; coupled with the right incentive, you'll see it grow month over month.

For more stories from SellingPrepaid E-Magazine, as well as breaking news and forums devoted to the prepaid sphere, please visit

Robert Christiansen is Senior Vice President at ARM Loyalty, providing loyalty and rewards programs for the prepaid market. He was co-founder and Chief Operating Officer of Bank Freedom prepaid debit cards and is a 25-year veteran of the technology industry. You may contact him at

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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