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A Thing

On EZ Street with ICS

About seven years ago, a company by the name of Intelligent Card Services (ICS) entered the phone card activation market. They company grew and created new technologies related to stored-value and loyalty cards, prepaid debit card activation, card issuance and processing transactions for private card programs. In December 1999 their technology was patented under Patent No. 6,000,608.

Robert Dorf, President of ICS explained why this is important to ISOs. "Our experience with prepaid phone card companies and their method of distribution allows us to understand how to structure a program for ISO groups and their merchants. We had a joint venture with a public telecom, which limited our ability for a number of years to make our programs available. Since that has ended we are now seeking relationships to use our processing capability." ICS provides services to a variety of entities including retailers, e-tailers, banks, bankcard processors, and prepaid card service suppliers, including phone, Internet, cellular and ATM suppliers.

The company's processing platform supports:

  1. Activation of prepaid phone, Internet, cellular and ATM cards.
  2. Issuance, activation, and use of the Gift of Gabcard--a gift card which can include phone card ability.
  3. Issuance of the e-ZLane--a financial card tied to a single financial account that allows for different "purses," such as Internet, phone and loyalty. These purses are seamlessly managed by the card and the ICS processing hub.
  4. Issuance of anonymous cards--cards for the "un-banked" which may be used over debit networks and ATMs. Dorf said, "We are a creative software and processing company. We can customize programs for groups of retailers. So, if you have a group of retailers that wants to set up loyalty debit cards, we are the company to call."

ISO Benefits

ICS offers the ability to issue various cards. Therefore, benefits to the ISO are two-fold. Each of the cards creates a transaction, which generates revenue. ICS also offers services which generate revenue as well. For example, in the case of a phone card, the ISO would earn revenue from each POS transaction or activation. The ISO will also represent the phone group and earn a percentage of the sale of the phone card. It works the same with prepaid cellular, prepaid Internet, gift cards, etc. Dorf explains, "By selling card programs, the ISO earns additional transaction fees from their existing account base, while earning fees from the services the cards support. This is a powerful package when signing up new accounts as well."

ICS is not a bank, nor do they perform merchant processing. Dorf tells us why. "Our reason is simple--we do not compete with the banks and their ISO groups. We complement them. We are not a sales organization." ICS has relationships with banks and networks, such as Concord, NYCE, Michigan National Bank, and Global Payment, to name a few. However, ISOs may have another service provider that they would like ICS to work with, and Dorf tells us, "That's fine. This is not a closed system; this is not exclusive. We want to help ISOs offer the best quality product to the merchant."

One way ICS demonstrates how they help ISOs is by prohibiting competition. All an ISO needs to do is register their retail locations with ICS and the company will not allow other sales groups to sell their services to those merchants.

Programs

ICS offers prepaid card activation of phone, Internet or cellular cards. ICS has the suppliers who wish to "activate" and sell their cards at retail locations through ISOs.

ICS also offers two types of financial card programs--those affiliated with a Direct Deposit Account (DDA) and those not affiliated with a DDA. Those not affiliated with a DDA are also known as prepaid or stored-value programs. Each program is custom built using their existing infrastructure, delivering a program that meets the needs of the specific client. The programs support direct point-of-sale transactions, Web site transactions and commercial bank network transactions, including ATM transactions. E-ZLane is an example of ICS's DDA program; the prepaid ATM cards and prepaid gift cards are examples of the non-DDA program.

Non-Individual Direct Deposit Accounts--Gift Cards

The gift card is quickly becoming the method of choice to replace gift certificates. ICS has a patented gift card program that works wherever a debit card is accepted. Universal gift cards are similar to prepaid ATM cards. The holder does not register or maintain a checking account, but has access to prepaid funds through the point-of-sale. The gift card programs can be customized by any retailer to include features such as phone capability (The Gift of Gab card), and the ability to allow a community of retailers, such as a mall, to accept the card. The gift card can be personalized with the retailer's brand name and the name of the recipient; personal messages can be included, and cards can be sold and redeemed at the merchant's Internet site.

Selling and activating a gift card with ICS is simple:

Prepaid ATM Cards

Card service differs from "regular" ATM accounts offered by banks in that services such as online use, prepaid phone services, bill paying and money transfer are available, in addition to ATM, and retail point-of-sale access. ICS manages the card base and settlement. The bank houses the master account.

The card is a prepaid, fully functional ATM card that can be issued and activated in a fashion, similar to a prepaid phone card, in a variety of ways to benefit the merchant and ISO. For example, there is the Kid eZ, a card designed for teens, with rewards geared to the teen market. Cards can be limited to specific retail groups. Cards can include telephony functions. Cards can function as a payroll direct-deposit card. The card can work on the Web. For any of the programs, ICS manages the card base and settlement, builds the network of accepting retailers' point-of-sale and ATMs, and manages the money transfer and rewards program.

Individual Direct Deposit Accounts (DDAs)--e-ZLane

Loyalty rewards programs are diverse, but there is no single program which allows a community of retailers to reward a cardholder while assuring that the consumer will return to those merchants to redeem the rewards. Some financial cards reward by using airline miles, some by giving financial rebates to cardholders who may use that rebate anywhere. The e-ZLane card works to bring the consumer back to the merchant, increasing the merchant's sales and the ISO's residual.

The e-ZLane multi-function financial card features a single financial (DDA) account that has different "purses" such as Internet, phone and loyalty. These purses are managed by the card and the ICS processing hub. Until e-ZLane, there was no simple way to use one bank account to shop online and at traditional retailers in a secure manner, combined with instantaneously managed loyalty rewards. ICS's multi-purse capability delivers a perceived separate Internet financial account, creating a wall around the true bank account, limiting exposure on the Internet. Dorf tells us, "What is unique is that this is a merchant-driven program with a financial card--there's nothing like that."

e-ZLane is a retailer-driven, multi-function loyalty card. Retailer-driven means that a community of retailers can reward a cardholder instantaneously as they shop. Redemption is controlled within the community of retailers so that traffic is driven to that community of retailers while simultaneously rewarding the e-ZLane cardholder.

e-ZLane is easy to promote since it benefits retailers and consumers. The benefits for retailers include the ability to enhance a current loyalty program, reward and stimulate return traffic, support cross marketing for a community of retailers and establish couponing to card and target marketing, without changing existing POS terminals.

The benefits for consumers include receiving rewards and discounts, the ability to use the card at the ATM or POS, and the ability to use the same card for physical and virtual storefronts.

Benefits for merchants and consumers can translate into benefits for ISOs, in the form of residuals. Dorf explains, "We want to be the technological glue between the ISO, who has all these services to offer, and the merchant, who would like to reward the cardholder. Instead of rewarding the consumer with airline miles, which doesn't drive a transaction, we would like you to offer rewards that are redeemable at the merchant's POS that do drive the transaction."

Compensation

ISOs earn a percentage of every service that they bring to ICS. And, later this year, ICS will offer a total turnkey package for all small- to medium-sized retailers. In other words, if you are an ISO with a group of 10 stores, ICS will have an entire business to serve that distribution channel. For additional information about all the ICS programs, visit www.intcard.com.

ICS is divided into two parts, the operating company and the patent group. The patent group is handled by attorneys who are currently discussing licensing opportunities. If you would like more information about patent licensing, contact Paul R. Gupta of Sullivan & Worcester LLP at (617) 338-2400.

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