Card to fight payment commoditisation soon

You frequent Barista, but haven't been there for quite sometime now. Don't be surprised if you get a personalised offer to entice you to visit your favourite joint.

This never-experienced excitement is being promised with a yet-to-be-launched, chip-based credit card. The card will allow merchants to run their own programmes on the UTI backbone and develop personalised offers for each such card holders.

UTI Bank, the third largest private sector bank, is launching the chip-based credit card in association with French card solutions company, Welcome Real Time.

Sameer Nemavarkar, vice-president-retail banking at UTI Bank, said that the card, to be launched by the year end, would enable loyal customers to receive "instant rewards" from merchants such as Pizza Hut, grocery chains and retail chains.

Card payment service has today become a commodity and the next level of competition in credit cards will be about making customers enjoy a new experience while making payments.

Welcome Real Time helps banks fight commoditisation by providing card payment software making the payment experience new, exciting and different, so that cardholders and merchants focus on the added value that the card provides, rather than simply the cost it represents.

Reddy, vice-president at Fractal Analytics, said that the Welcome solution worked on the principle of "recency, frequency and value of purchase".

If the frequency of visit of a cardholder to a particular merchant is 10 days, but the last (recent) visit was nearly a month then the Welcome software generates a personalised offer depending on the amounts spent on past purchases.

"Welcome's enhanced payment solution provides a strong value proposition that focuses on surprising and delighting your card members at the moment of payment. It offers varied customer enhancements such as immediate calculation of points, instant delivery of surprise promotional offers and easy redemption of rewards at the point of sale," said Piyush Khaitan, managing director, Venture Infotek Global Pvt Ltd, Welcome Real Time's partner in India.

Using Welcome solutions, merchants are encouraged to run their own specific promotions and purchase incentives to their customers. The value of the incentives and rewards to the cardholders vary with high-value ones going to higher spenders.

The promotions are real time, instant and entirely automated with little or no additional effort at the point of payment.

Banks in the UK lose 400 million pounds a year through card fraud but studies show they could be losing 2 billion pounds due to commoditisation, primarily through rate wars and fee reductions.

Studies in other countries are beginning to show that payment commoditisation everywhere is five-ten times as great a problem as fraud.

Getting customers and merchants to experience payment as something new, exciting and different is seen as the most effective way to avoid commoditisation of credit cards.