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With Just One Swipe

"Gift card was historically geared toward larger companies, and mom and pop couldn't take advantage of it. We want to offer it to them."

With that singular purpose in mind, one company has restructured its operations, changed its name and is actively courting the ISO community. The company is SwipeCard, Inc., a Nevada-based S Corporation that provides merchant services, electronic and Internet payment solutions to clients nationwide.

SwipeCard was formed 1997 when a small group of financial services professionals joined forces to address gift card marketplace needs under the name Advanced Bancard. They recognized there wasn't anyone addressing the smaller merchant market. The large companies were looking for high-end solutions and Advanced Bancard saw a space for additional types of payment other than traditional Visa and MasterCard.

Starting with two employees, Advanced Bancard grew to a sales force of 20. In 2001, Advanced Bancard shifted gears, let go of its sales force and focused on agents and ISOs. To create a brand that better represented the new venture, Advanced Bancard became SwipeCard and concentrated on a core competency of gift card, loyalty and stored-value programs.

"SwipeCard simplifies ISO life because they now can go to a merchant and confidently say, 'You can sell gift cards now,' " President/CEO Jim Fisher says. "Credit card processing is a commodity, and ISOs are asking, 'How do I set myself apart from 30,000 other agents out there selling solutions?' The business model has changed, and gift card companies like ours have changed that business model. We help ISOs go in and say, 'We can replace your paper program and add tracking.' "

In fact, the fastest-growing segment in gift card solutions is tracking. "ISOs are selling information, and we can track all that buying info for their merchants," Fisher says. "Comptrollers and CFOs love it."

SwipeCard provides merchants with the ability to activate, recharge and track all cards electronically. Incorporating the Bill Gates philosophy of taking anything paper and making it electronic, SwipeCard is offering simplicity for the merchants as well. Its "simplistic" product line includes an electronic prepaid gift card program (face-to-face transactions) offering stored-value cards, discount cards, corporate cards and loyalty programs as well as a virtual gift card program (Internet gift cards) offering employee incentive programs, member services, credit card risk management, payment gateway services and ACH services, customer service and order fulfillment.

SwipeCard's target market includes everything from retail mom-and-pop stores that have one location to multistore chains that require customized solutions. In addition to traditional brick-and-mortar retail outlets and restaurants, SwipeCard offers products for MOTO (mail order/telephone order) merchants and e-commerce, Internet-based gift card solutions.

With all of these products and services, is there one in particular that sizzles?

"Our most in-demand service is our gift card program," Fisher says. "You've got the merchants who want the product, and then there are the ISOs and agents who want the products for their merchants. Both want to develop revenue streams [and] recurring revenue and want to be able to differentiate themselves from the guy down the street who just has paper gift certificates."

SwipeCard differentiates itself with its gift card capabilities, in particular the capability to download on existing VeriFone terminals. Historically, merchants have had to upgrade equipment on Trans330 to accommodate gift card solutions. SwipeCard claims to be the only company that can download on 330 and 380 terminals, as long as there is a free key on those terminals - and 80-85% of existing VeriFone terminals do have free keys. SwipeCard's ease of downloading into existing systems is also extended to Hypercom through First Data and has certified with Nurit.

"We see the big players as providers of other gift card programs," Fisher says. "There are smart card equipment providers, and the cards themselves are very expensive. We don't see the market for smart cards. We're concentrated on mag stripe gift cards because it's affordable for the merchants we focus on and it's tried-and-true technology we fully leverage right now. The new merchants out there are those mom-and-pop and smaller chains that haven't been able to qualify for gift card programs."

SwipeCard's criteria include minimum sales volume of 500 card orders annually. SwipeCard is working with several hundred merchants. Those merchants each receive individual registration forms. SwipeCard can customize gift cards with merchant artwork or offer generic cards.

From the time SwipeCard receives merchant artwork, the turnaround time is between 10 to 15 business days. SwipeCard also does mass mailings and e-mail blitzes to customer databases. Not many other providers can do this.

SwipeCard takes all merchant demographic information - i.e., birthdays, anniversaries, whatever merchants obtain from their customers - and hosts the info on its network. A key factor is that merchants always own the information and can download it at anytime into a spreadsheet. If they cancel the program with SwipeCard for whatever reason, they still retain ownership of their customer data. SwipeCard's contracts clearly state that all data reverts back to the merchant. Contract terms are for 12 months, and the merchant signs on the dotted line for free.

But it is the ISO that SwipeCard depends on to sign up merchants. "We want the ISO involved with the merchant as much as possible," Fisher says. "We want them to hold their merchant's hand. We train the ISO so the ISO can handle all downloads, artwork submission and sell programs."

SwipeCard provides ISOs with training manuals that walk them through the process, explaining all the nuts and bolts of the programs. Depending on the size of the ISO, SwipeCard also will do on-site training.

How long does it take for SwipeCard to feel comfortable with an ISO selling its products and services? "It is so individualized," Fisher says. "We find the average ISO requires at least a day or two of training because of how the program needs to be sold. It is different from a credit card program. We are finding many credit card sites out there. All these processors may have gift card capability, but when you go to their Web sites, there's no depth to the product offering. The credit card industry is not quite equipped to sell it. The merchant needs to be educated and the ISOs need to be trained."

Vital to ISOs selling these programs is SwipeCard's educating them about two key factors that play a big part in the gift card space: escheatment and breakage.

Escheatment loss is something SwipeCard firmly believes every ISO and merchant needs to be aware of. In more than 40 states, an unused gift certificate goes back to the state after a period of time. SwipeCard details these laws on its Web site and is quick to point out that active gift cards do not fall under those escheatment laws

Electronic gift cards are kept active by maintaining an account fee. With SwipeCard's electronic gift card programs, unused gift cards can be depreciated over time with an automatic deduction taken out monthly. The state then cannot claim any monies since the account is kept active. That monthly deduction keeps the money in the merchant's hand. What makes SwipeCard so attractive in this situation is that paper certificates cannot be depreciated.

Breakage is a big selling factor when it comes to SwipeCard. Unredeemed or partially redeemed cards still represent income to merchants. Statistics on gift cards show 5% to 15% of gift cards go unredeemed.

"Say a merchant issues 5,000 cards at $50 per card," Fisher says. "If they have 5% unredeemed, that's $50,000 in found money." Electronic gift cards programs are gaining market appeal because of numbers like that.

Reducing fraud is another appeal that SwipeCard promotes. With an electronic gift program as opposed to paper, cards must be activated at the point-of-sale with a clerk or store identification number entered before issue. Tracking those cards is ensured as well. There's yet another appeal: Paper certificates can't be recharged, but electronic cards most certainly can, ensuring repeat foot traffic as well. These are issues merchants are very interested in as they try to track new customers, develop revenue and reward loyal customers.

Do these aspects translate to ISO appeal? Consider a value add-on, easy implementation for new and existing merchants, guaranteed income with card-production fees, and residual income on transactions with a high profit margin, and the answer must be a resounding "yes." Throw in 24/7 merchant support, Web site support, PowerPoint presentation support, and it would appear that SwipeCard has made gift cards programs oh so simple to sell and oh so hard to resist.

SwipeCard recognizes its programs are more conceptual. Merchants are dealing with a piece of plastic with artwork that not only is an advertising tool but a tool that develops incremental revenue. Obviously, it differs from credit cards, especially in its marketing aspect.

That is why SwipeCard believes marketing is crucial to the success of its programs and provides merchants with collateral to help sell them - badges, window posters, logos, stickers, etc. For its ISO partners, SwipeCard's marketing plan includes advertising in major trade publications and trade shows and Web site promotion in search engines and pay-for-click services.

SwipeCard hopes that its intensive marketing plan will result in solid expansion of its reseller network, a goal first and foremost in its operation. "Gift card selling is face to face," Fisher says. "Geography is what will work. Our goal is to stay lean and mean and support resellers on the street."

SwipeCard Inc. ISO contact: Glenn Lench Phone: 888-311-3700, ext. 104 E-mail: Glenn@Swipegiftcard.com

Company address: 101 Convention Center Drive, Suite 1270 Las Vegas, NV 89109 Phone: 888-311-3700 Web site: www.swipegiftcard.com

ISO benefits: • Provides gift card tracking but also simplicity for merchants. • Gift card solutions can be downloaded on existing VeriFone terminals. • Does mass mailings and e-mail blitzes to customer databases. • Merchants own demographic information and can download it at anytime into a spreadsheet, even if they cancel the program with SwipeCard. • Provides training manuals and also does on-site training. • Guaranteed income. • 24/7 merchant support, Web site support and PowerPoint presentation support.