Since being launched 9 months ago, the card has already garnered acceptant 150,000 merchants with plans to reach 1 million by the end of the year.[From National ACH: Revolution Card Acceptance Rising]
Their essential tactic is, as we’ve discussed before, to provide a more merchant-friendly payment card scheme (although I still don’t really understand why merchants don’t just do this for themselves if payment cards, as they claim, are taking such a big chunk out of their profits) that is geared up for the reduced-interchange world of the future:
The main advantage to merchants is that accepting the card costs only 0.5% of each purchase amount, significantly less than the discount rates merchants pay to accept credit cards. In addition, the company recruits merchants as distribution partners and rewards them to provide an incentive to promote usage of the card. Merchants have the option of co-branding the card.[From National ACH: Revolution Card Acceptance Rising]
Price and promotion are only part of the future reduced-interchange world, because one might hope that the kind of new technologies that we are always talking about here will provide platforms for new value-added services to benefit all of the stakeholders. Falling interchange might even stimulate some new developments:
This strategy is especially relevant if interchange gets cut. Merchants will be paying less, so there is an opportunity for the merchant’s acquirer to offer new value added services that are paid with a portion of the money freed up by lower merchant discount fees.[From Aneace’s Blog: Are some banks already preparing for lower interchange fees?]
There’s a great deal of scope here, because the “narcotic” of interchange (to use Steve Mott’s provocative description) has meant that such value-added services (loyalty, coupons, rewards,, management, control, folio, groups and so on and so on) are still in their infancy. Retailers pay large amounts in interchange for (as they see it) very little.
He also notes that IKEA pays some €90 million annually and Tesco pays about €128 million in fees to the banks for processing credit and debit cards – that’s more than €210m p.a., between these two firms alone.[From Retailers count the cost of interchange]
it therefore ought to be easy to co-opt retailers into using a deploying value-added services and charging them for the “something” of these services rather than the “nothing” of interchange.
There are lots of value-added services that you can imagine using around payments. Where’s my text notification of credit card transactions, for example? I had coffee the other day with a guy who used to work for one of our customers and had taken a year off to travel around the world (visiting over 30 countries on the way!). He asked my his bank had insisted on phoning him every time he used his card, wasting his money on international roaming charges. Money that he would rather have spent on souvenirs than mobile top-ups. That’s just one example: I want electronic receipts, better loyalty schemes, spending controls (configurable on a per-child basis) and much much more! Text messaging is just the beginning, I would think.
I was thinking about text messaging recently because I was really surprised to read over at Payments News that American Express have just started a (not terribly interesting) text message service:
American Express has introduced Text MYAMEX – a new mobile service that allows American Express cardholders to learn their account balance on the run.[From Payments News: Text MyAmex – July 22, 2008]
The reason that I was surprised was that I thought this kind of thing had been introduced about 15 years ago. It had never occurred to me to check, but I guess that at the back of my mind I thought that if I ever read any of the stuff I got with my Amex card (note: I am a very satisfied Amex customer, having been with them for 27 years now) there would have been something about a number to text to get your balance and a mini-statement. Well well.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]