Closed-loop Card Programs as an Complement to Open-Loop

Closed-Loop Card Programs as a Closed-Loop Card Programs as a Complement to Open-LoopComplement to Open-Loop

A Little About Multi ServiceA Little About Multi Service A closed-loop billing and payment service provider for more than 30 years, we’ve processed transactions for program sponsors such as:

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Quick HousekeepingQuick Housekeeping

To make sure we are all on the same page:

Open-loop: A general purpose card carrying the Visa, MasterCard, Discover or American Express logo that can be used anywhere those cards are accepted.

Closed-loop: A card or account that can be used at a select store or group of stores.

Program sponsor: A company or organization that partners with an open- or closed-loop card issuer to provide its business customers with a commercial payments vehicle.

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The Commercial Card MarketThe Commercial Card Market

General purpose purchase, travel and fleet cards are widely adopted by accountholders:

• Streamline purchasing processes

• Obtain oversight of employee transactions

• Achieve cost savings and earn rewards for purchases made.

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For Program Sponsor:• Cost effective / efficient implementation• Customer loyalty• Incremental sales• Sales insight• Marketing opportunity• Guaranteed payment• Minimal credit risk

For Accountholder:• Cash flow management• Streamlined purchasing via e-payment vehicle• Streamlined AP processing• Universal rewards

The Inherent Benefits to Open-LoopThe Inherent Benefits to Open-Loop

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Shared BenefitsShared Benefits

For Program Sponsor:Network control

Functional customizationCustomer captivityFee management

For Accountholder:Minimal fraud, waste, misuse

Rewards

OpenOpenCloseClosedd

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Closed-loop programs can be used to efficiently expand or focus a card program.

Network ControlNetwork Control

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Closed-loop programs can be used to efficiently expand or focus a card program.

Network ControlNetwork Control

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Network ControlNetwork ControlClosed-loop programs can be used to efficiently expand or focus a card program.

The Up Side:

• Control over merchant qualifications.

• The ability to turn a merchant on / off at will.

• One program no matter the geographic reach.

The Down Side:

• Limited acceptance to specified merchants.

• Time / cost to implement merchant network and card acceptance.

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Functional CustomizationFunctional Customization Closed-loop programs operate on their own “rails,” and therefore, allow for

functional customization.

Consistent Level III data submission

Specialized data capture not currently supported by Interchange

Price application after the point of sale, but prior to billing, or even at the point of sale.

Invoice verifications

Specialized purchase controls

Specialized billings

Specialized authorization requirements

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Functional CustomizationFunctional Customization Closed-loop programs operate on their own “rails,” and therefore, allow for

functional customization.

The Up Side:

• Specific to you, your merchants and customers.

• Additional benefits are dependent upon the type of functionality initiated.

The Down Side:

• Time / cost to implement new “rail” system.

• Impact on merchants’ business-as-usual.

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Customer CaptivityCustomer Captivity 71% of fleets in the trucking industry say that they are more likely to buy

from vendors that have implemented a closed-loop program.

A dedicated line of credit means that a competitors’ sales do not have an effect on the customers’ purchase opportunity with the program sponsor.

Streamline billing and payments for customers while maintaining internal operations.

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Customer CaptivityCustomer Captivity 71% of fleets in the trucking industry say that they are more likely to buy

from vendors that have implemented a closed-loop program.

The Up Side:

• Revenue opportunity.

• Additional control over portfolio.

• Additional “touch points” with customers.

• Control over messaging.

• Control over internal operations.

The Down Side:

• Inability to obtain transaction data for all customer purchases.

• Additional account for accountholder / merchant to manage.

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Fee ManagementFee Management 71% of merchants cite “Fees too high” as a reason to resist or not accept cards1.

First Annapolis and NAPCP. End-user Survey on Supplier Acceptance. Report of Survey Results. Nov / Dec 2009.

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Fee ManagementFee Management 71% of merchants cite “Fees too high” as a reason to resist or not accept cards1.

The Up Side:

• Long-term cost savings. The Down Side:

• Upfront cost and opportunity cost in time to launch.

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Fraud, Waste and MisuseFraud, Waste and Misuse

Be mindful of portfolios with:

• High employee turnover

• High concentration of not-for-profit or government clientele

• A need for repeated, high-value transactions

10% of organizations report that corporate / commercial cards (i.e. purchase cards, T&E cards) were the payment method most responsible for financial losses sustained by their organizations resulting from payments fraud2.

2010 AFP Payments Fraud and Control Survey. Report of Survey Results.

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Fraud, Waste and MisuseFraud, Waste and Misuse 10% of organizations report that corporate / commercial cards (i.e. purchase cards,

T&E cards) were the payment method most responsible for financial losses sustained by their organizations resulting from payments fraud2.

The Up Side:

• Limited risk exposure. The Down Side:

• Limited acceptance for the cardholders.

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SummarySummary Closed-loop networks can serve as an alternative or complementary solution, when an open-loop program is deemed:

• impossible to implement

• overly simple for program sponsor or accountholder requirements

• too broad for purchasing requirements

• too expensive from a long-term Interchange cost perspective

• too risky for accountholders