Polymath Consulting Private Label Cards - Polymath Consultancy

Polymath Consulting
Private Label Cards – A Brief Overview
& Review of Programs in Europe, Middle East and Africa
Date: March 2012

What is a Private Label Program?
• Private Label cards at their simplest are Visa/MasterCard’s that do not have a badge on the front
• They still require the same industry structure e.g. BIN sponsor etc
• They still require the same security of processing – so certified etc
• A Private Label Program enables proprietary, merchant- branded transactions, typically processed
in closed-loop environments, to be processed through the scheme networks.
• The main benefits of a private label product are:
• Utilises existing POS systems and infrastructure
• Significantly reducing investment cost compared to point-to-point solutions
• Ensure faster program implementations
• High end-to-end reliability tested to handle large transaction volumes
• Programs can be often more easily expanded into new countries or to include new merchants as
their are less technology implications
• Can be offered as both prepaid and charge/credit products
• Value added services like fraud management, loyalty point processing, program performance
reporting and analysis can be added. This modular approach ensures an organisation can build
their program to meet customer expectations as they are identified reducing redundant
functionalities.
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What is the Potential
• Polymath Consulting believe there is a VERY strong potential for private label programmes that
has yet to be fully realised outside of North America
• In Europe there are current four companies live managing programmes we have identified
(if you are live with one and not below please contact us):
1. Prepay Technologies - MasterCard
2. Store Financial - MasterCard
3. Flex-e-vouchers – Mastercard
4. Sodexo – Visa
• In the Middle East there there is one programme live:
• Ahli United Bank in Kuwait – MasterCard
• A full analysis and case studies are provided at the end of this analysis
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Private Label Rules Overview
• The private label regulations quoted here are based on MasterCard for the sake of reference, Visa
have very similar rules.
• Acquirers and participating merchants must accept Maestro or MasterCard/Visa.
• Issuers must have a MasterCard/Visa or Maestro license in at least 1 country.
• Each PVL program, card design and customer communication must be approved by
MasterCard/Visa using a simplified process.
• Issuers must pre-fund settlement to mitigate settlement risk, as MasterCard/Visa may use these
funds to satisfy settlement obligations towards acquirers.
• Interchange and exception processing rules can be the same as for Maestro MasterCard/Visa.
They can also be chosen by the issuer/programme managers under bilateral agreements with the
acquirer/acquirers
• Merchant and issuer must have an agreement in place that covers for example the financial terms,
how merchant fee is adjusted vs interchange and the merchant's obligation to comply with the
PVL rules.
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Overview of Private Label Card Requirements
• Certified manufacturers are recommended, but this is not mandated
• Card personalisation must be done by certified personalisation bureau or those registered by the
MasterCard Registration Programme (MRP)
• No reference to the MasterCard/Visa family of brands (e.g. MasterCard/Visa, Maestro) on the
physical card or marketing material
• Unique 16 or 19 - digit full card number on the front or reverse of the card (unembossed & not in
the structure xxxx xxxx xxxx xxxx yyy)
• Cards are to be produced to the ISO standards (LoCo or HiCo, PVC 760 micron plastic or higher
grade)
• For MasterCard cards can be issued either as MasterCard or Maestro private label cards
• Optional:
• Valid from & to dates
• Signature Panel
• Service desk telephone number
• PIN (no rules on PIN mailer)
• EMV (SEPA mandate does not apply to PVL)
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Putting Private Label Into Practice
• Our current understanding is that Private Label and Scheme branded cards cannot be mixed on
the same BIN i.e. A separate BIN is required for private label programs
• Transactions pass through the acquirer as if they were Visa/MasterCard therefore the acquirer
does not have to be formally notified, unless bilateral agreements are put in place
• For online transactions although the transaction passes through as any normal Visa/MasterCard
consumers if they are selecting from a drop down ‘card type’ box must be able to select the
private label card as an option.
• Processors need to have the merchant ID in order to ‘white list’ transactions coming from the
merchants that are part of the Private Label acceptance network.
• Mastercard fees are fixed per transaction with no volume discounts
• A brand partner is enabled to negotiate agreements with the Issuer and Acquirer to incluence the
interchange (influencing MSC fees) and if the brand is also the merchant there is scope to make
individual arrangements with regards to settlement.
• The brand can also hold the subject to sufficient funds for settlement at all times – negotiations
required with BIN sponsor as to this exact level – don’t understand this statement
• It is possible for Paypass to be licensed for use on a private label products
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Prepay Technologies
• First Hybrid Gift Card programme (closed loop & restricted access
network)
• Launched UK 2006
• Programme is redeemed in Ticketmaster & over 70 ticket centres in
the UK
• Distribution: in store, on line, B2B & via 3rd party retail outlets
including Sainsbury’s, WHSmith, Clinton Cards, ASDA, Shell,
Borders, Argos to name a few & corporate distribution
• Recent launches in ROI, Finland, Norway, Germany, Australia, NZ.
Denmark & Netherlands to launch Q1 2012.
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Prepay Technologies
• First PVL programme launched October 2006 for
Edenred
• Ticket Compliments, Ticket Restaurant, Ticket
Benefits, Ticket Mind & Body and Ticket Meal and
Wellness
• Launched in UK, Poland, Germany, Belgium,
Romania, Slovakia, France, Hungary, Czech
Republic, Finland and Sweden
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Prepay Technologies
• Other programmes launched include:
• Best Buy
• And Thomson B2B
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Store Financial
UK Mall
• Abbey Centre
• Bluewater
• Bon Accord & St Nicholas
• East Kilbride Shopping Centre
• Forestside Shopping Centre
• Foyleside Shopping Centre
• Freeport Fleetwood
• Freeport Talke
• Gloucester Quays
• Gyle Shopping Centre
• Lakeside Village
• Liverpool ONE
• Meadowhall Shopping Centre
• Princes Quay
• Telford Shopping Centre
• Touchwood
• Trafford Centre
UK non-mall
• Castle Galleries
• Animal
• HTA (National Garden Gift Card)
EU mall
• Athlone Towncentre (Ireland)
• L'Esplanade – (Belgium)
• McArthur Glen – Berlin (Germany)
• McArthur Glen – Luxembourg (Belgium)
• McArthur Glen – Parndorf (Austria)
• McArthur Glen – Salzburg (Austria)
• Nueva Condomina – (Spain)
• Waasland Shopping Centre – (Belgium)
• Westland – (Belgium)
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Store Financial
Client
• Horticultural Trade Association (HTA) are a membership organisation for garden centres
(independent & multiples)
• 2000 member sites across the UK
• Well established existing voucher scheme
• Fragmented card acquiring architecture
Requirements
• Gift Card accepted at all member sites
• No POS integration for members
• Automated funds flow
• Fraud & credit monitoring
• Sold in 3rd Party distribution
Implementation
• 3 phased implementation approach:
• Phase 1: 3rd Party gift card mall sales in UK for incremental growth – Oct 2011
• Phase 2: Sales direct from member retailers
• Phase 3: On-line and B2B sales
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Flex-e-vouchers
• Westfield Shopping Towns Ltd gift card implemented in February 2012
as a replacement for Maestro branded open-loop gift card by
programme by program manager Flex-e-vouchers, processed on Global
Processing Services FZLLC with the issuer as IDT Financial Services
• Acceptance restricted to 981 merchants with multiple acquirers in 4
locations:
1. Westfield Stratford City
2. Westfield London
3. Westfield Derby
4. Westfield Merry Hill
• Maximum load value of £1000 per card
• Sales channels:
• Retail customer services desk
• Automated instant issue and activation kiosk
• ‘Roaming’ instant issue and activation sales via tablet PC with wi-fi
connectivity
• E-commerce via www.flex-e-com and Westfield branded white label
sites hosted on flex-e-card.com
• 2 card designs currently live
• 10+ types of card packaging available for cardholders to select

Sodexo
• The Azure card was launched in 2009 with G-T-P, and BIN
sponsorship migrated to Raphaels Bank in 2010. Processing
remained with FIS all along
• The UK government issued the PVL card to all asylum seekers who
have had their asylum claims refused and are waiting to return to
their own countries but have no other way of supporting themselves;
replacing a previous paper voucher system.
• The card has the service user’s name on it but no other identification
will be required for use. Only one card is issued to each family unit
or couple
• The card cannot be used for ‘cash back’.
• The card is only accepted at a limited number of major
retailers/supermarkets chains (Tesco, Sainsbury’s, Boots, Asda,
Peacocks, Morrisons, The Co-operative)
• From November 2009 to December 2010 there have been over 1
million successful transactions which represents 85% of the total.
• Only 0.25% (3,600) of the unsuccessful transactions were due to technical faults, with 14% due to
users not having sufficient funds in their account and the remaining 0.75% due to service users
attempting to use their card in non-affiliated stores.
• The estimated amount of unspent credit recovered from the Azure card for the first year of its
operation is £650,000.
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Sodexo
• Spirit of Cadeau was launched pre Christmas 2011 in France
• The programme is managed by CCDS, a JV between Sodexo and Crédit Agricole, processed by
FIS and issued by Raphaels Bank
• Two gift cards offers, one sports orientated and towards the household, others to follow
• Both cards are available as either:
1. Fixed denomination: €40, no reload, no KYC,
2. Premium product: Better packaging, cost €3, you can variable load € 20 – €250 no registration for
first load, but reloading only on registration
• Group Product: Premium product with website registration for friends and family to load values onto
the card, maximum €2,500
• Group Cards, period of loading set up by
purchaser/registered person
• Cards can be used online at retailers
• If not enough funds on the gift card a second
card form of payment e.g. Scheme card is
requested for the balance when using online
• On premium card the cardholder may request
one retailer to be added to the ‘retailer club’
(e.g. if not already affiliated, he may ask his
preferred golf equipment store or deco store
to be added to the affiliates white list).
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Al Ahli Bank
• Ahli United Bank (AUB) and The Sultan Centre Food Products Co.
(TSC) in Kuwait launched the AUB TSC Prepaid Private Label
Card exclusively designed for Bait Al-Zakat in 2011
• Bail Al-Zakat is a charity responsible for granting monthly supplies
to its beneficiaries
• The AUB TSC Prepaid Card, which was created to replace the
current paper-based voucher system, is automatically uploaded
each month with funds for registered consumers.
• Consumers will simply need to take the card to the TSC outlets to
buy goods
Background Information: Bait Al Zakat
• Bait Al Zakat is an independent government agency established in 1982; to bear the
responsibility for disbursement of donations and contributions in the form of Zakat
and Charities received from companies, individuals and various organizations to the
needy families as well as to local agencies and authorities
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David Parker
davidparker@polymathconsulting.com
07712 079 307