E-print | from Paybefore Update | June 2011 | Volume 5 Issue 9 | www.paybefore.

com

• The industry resource for prepaid and stored value cards •

t o wat c h

Rewards Program Combines Education with Cash Sweepstakes to Promote Adoption, Usage and Retention
By D.J. Murphy, Associate Editor

O

ne issue that continues to present a formidable challenge to prepaid card marketers is how to effectively educate consumers on the products’ benefits. Confusion among consumers (and media and lawmakers) as to how prepaid cards actually work and how cardholders can optimize their use has led to increased scrutiny. Now, a new company has launched its version of a rewards program specifically for prepaid cards that it believes can solve this issue and promote long-term retention at the same time. Rewards programs for payment cards are well-established as an effective means to incent certain behaviors. And, New York City-based PayPerks Inc. thinks the key to increased adoption, retention and usage of prepaid cards is employing incen-

tives to ensure consumers have the knowledge they need to use the cards to their best advantage. “In the ideal world, everybody benefits from prepaid,” says PayPerks’ founder and CEO Arlyn Davich. “If a consumer uses the card correctly and in a smart way, they incur minimal fees and they use the card more. The program managers and card networks make interchange or fees, and the processors get paid on the increased transactions. But consumers aren’t aware of how to minimize fees and many aren’t even aware of the benefits prepaid cards can offer.”

Social Entrepreneur During a stint at business school, Davich became convinced that her future lay in social entrepreneurship—

the idea that companies can be profitable and scalable, yet do not have to compromise their desire to do social good. While exploring industries that would provide the best opportunity to start a business in that tradition, Davich found that prepaid was ideal. “We started PayPerks with the idea that, because everybody’s incentives were aligned, we could educate the consumer about why they would want a prepaid card and how to use a prepaid card effectively, while at the same time generating value for everyone involved from the program managers and processors to the card brands and issuing banks to the consumers themselves,” she explains. Davich calls PayPerks an educational rewards program designed specifically with low- and middle-income (LMI) consumers in mind. The main differences between PayPerks and typical payment card rewards programs are the behaviors it is encouraging and the shape the rewards take. “Rather than reward consumers on dollar volume, we reward them for completing our curriculum,” she says.

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E-print | from Paybefore Update | June 2011 | Volume 5 Issue 9 | www.paybefore.com

• The industry resource for prepaid and stored value cards •

“We reward them for the number, not the size, and type of POS transactions and a host of other behaviors, depending on what the program manager wants to incent.”

Hitting the Jackpot PayPerks’ other differentiator is how points earned are redeemed. “Regular rewards programs usually reward someone with something incremental to their spend, whether that be cash back, miles or merchantfunded rewards,” Davich explains. “We found that this segment is not motivated by something incremental to their spend, because they’re not really spending much anyway.” Based on research done by Harvard Business School Professor Peter Tufano and the nonprofit group Doorways to Dreams, PayPerks designed its programs with “prize-linked savings” principles in mind. Their research demonstrates that the LMI segment is much more motivated by chances to win a larger cash prize than they are by a guaranteed smaller sum. PayPerks translated that notion into a rewards program that manifests as a sweepstakes: Each point a consumer earns is worth an “entry” to win a cash prize, up to $5,000. The more points the user earns, the better his or her chance to win. Even how PayPerks draws prepaid card users into the program is designed to look and feel like the scratch-andwin games that this demographic frequently plays. The company’s collateral is designed to mimic the traditional scratch-and-win tickets that are marketed across the country. These tickets contain a code for setting up an online account with PayPerks.

“The scratchers work to generate a lot of awareness, excitement and engagement,” Davich continues. “We put them in paycheck and prepaid card fulfillment envelopes. We can distribute them at the POS to get attention there. We can distribute a digital scratcher via email or SMS. They can even be used to generate excitement for a prepaid card program at a bank or a check casher.” Once PayPerks gets consumers to its Website, Davich says the company can target their experience on the site by card program, banking status, prior card usage and language preference.

Learning Is Core Once a consumer creates a PayPerks account, it’s time to earn points. The company gives consumers the chance

to earn points in four main ways: learning, sharing, loading and swiping. Davich, who calls each of the four categories “modules,” says the difference-maker for PayPerks is the learning module. “It’s the core of what we do,” she says. “We have an entire curriculum on prepaid. It ranges from topics like ‘what is a prepaid card, a payroll card, a GPR card?’ to ‘how much can you save by enrolling on one?’ to ‘what happens when you lose your card?’” While the main benefit is to consumers who learn how to minimize the fees they incur when they use prepaid cards, program managers benefit from educated consumers as well. “We also can design the curriculum to reduce the call volume to a program manager’s customer service line,”

pay p e r k s

Marketplace Names: PayPerks Inc. Location: New York City Organized: December 2008 Open for business: September 2010 Line of Business: Educational rewards platform for the unbanked/

underbanked.
Secret Sauce: Storybook-like curriculum + sweepstakes-centered incentives = rewards model geared for the financially underserved. Founder: Arlyn Davich (founder, CEO); Jake Peters (co-founder, CTO) Investors: Columbia University, New York Angels, Esther Dyson and the Anthemis Group Ownership: Private Business Philosophy: Underbanked need not mean underserved. Business Model: Reward behaviors that increase value for all members of the prepaid value chain, including cardholders. Something You Might Not Expect: The whole PayPerks team jumps in Manhattan’s Washington Square Park fountain each time they hit an important milestone.

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E-print | from Paybefore Update | June 2011 | Volume 5 Issue 9 | www.paybefore.com

• The industry resource for prepaid and stored value cards •

according to Davich. “We work with program managers to find out what the main topics people are calling in to ask questions about and then design modules to educate customers on those topics so they don’t have to call in.” The curriculum also has been designed to appeal to visual learners, she notes. “It’s very visual. We have a team of illustrators who draws all our stories,” Davich says. “They’re written like storybooks with a big picture and one line of text underneath. At the end of each module, the user gets two questions. For each question they answer correctly, the user gets points.” The share module encourages cardholders to get family, friends and colleagues to sign up with PayPerks.

Load and Swipe The load and swipe modules aim to modify cardholders’ behavior by incentivizing whatever actions make the most sense for the program manager, though some behaviors are universal, Davich says. “We’re trying to increase load volume and longevity,” she explains. “So we heavily incent those two behaviors. Compared to getting 10 or 20 points for each learning module you

subtract points on any actionable trigger. We can award points for bill pay, for new category spend or for frequenting a certain merchant.” At the program manager’s discretion, —Arlyn Davich, PayPerks the platform also can subtract points for actions it wants to disincentivize, take, you can get 50 points for each Davich says, such as out-of-network direct deposit load or each time you put ATM withdrawals. funds on your card, which is a lot relative to the whole platform.” Davich says activities that promote Paying People to Learn keeping prepaid cards active for a PayPerks launched in a closed pilot longer period (e.g., reactivating their with Comdata in April and the platpayroll card when a consumer goes to a form already has several thousand new employer) garner big point values. users. PayPerks will not cite specific “We ask the program manager what data, but Davich says the company has its typical life cycle is. The typical been gathering metrics from the pilot answer is six to eight months. So we that suggest very strongly that its might award 500 points to cardholders concept has a significant impact on when they exceed that limit.” adoption and usage of prepaid cards. Because LMI consumers usually “When people are educated, when don’t spend large amounts on their they go through our entire curriculum cards, the swipe module rewards them on what a prepaid card is and they for the number and type, not the size, really understand it, 9 out of 10 want a of POS transactions they make. card,” she says. “The trick is giving “The program manager will tell us people the incentive to get through the what buckets people typically fall into whole curriculum. The beauty of this and where they want to move them to,” model is we are paying people to Davich says. “We can award points or learn.”

“The beauty of this model is we are paying people to learn.”

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