link to case study from Garanti Bank

Garanti Bank PayPass Watch launch – Case Study
Executive Summary
In 2002 contactless cards were launched generating much excitement from the industry and
cardholders. Contactless payment uses an antenna in the payment device to power and
communicate the payment account information to the point of sale (POS) system. Because the
antenna does not have to be “card-shaped” this opens the opportunity for a wide range of payment
devices, “it frees us from the card” an industry specialist said. It is estimated that some 60 Million
contactless payment cards are already in use with many more used in transit environments. The use
of contactless payments grew more than 15% last year and the market is now valued at more than
$200 million, according to ABI Research. It‘s expected to reach more than $820 million by 2013.
LAKS recognized that although cards were being issued that for real convenience, incorporating the
same technology into a watch would take contactless payments to the next level. Since 2002 LAKS
has developed state of the art contactless payment watches, the result is the product presented
here. We think you’ll agree it truly does put the WOW into payments.
Situation
In Turkey’s sophisticated and extremely competitive payment-card market, given a population that is
skewed toward youth (half the country is under 28 years old1), enamored of the latest technology,
and dedicated to the convenience of new form factors for payment.
Research has shown significant demand for payment capable watches. Taking away the FumbleFactor. Because people wear watches and do not carry them they always know where they are, this
takes away the stress and time spent fumbling for cash or cards normally carried in a wallet or bag.
Even the mobile phone shown above as a popular choice often cannot be located quickly when in a
bag, “how many times do people miss calls you make to them?”
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Positioning itself as an innovator, Garanti was the first bank in Europe to introduce MasterCard
PayPass functionality, on the Garanti Bonus Trink card in June 2006. The following year, the bank
began exploring the potential of a PayPass watch. From the beginning, Garanti had welcomed the
latest PayPass form factors, including fobs and stickers, to feed the market’s appetite for the most
up-to-date technological gadgetry.
As Garanti was working through these obstacles, the manufacturer LAKS, a global leader in
contactless watch manufacturing, approached the bank with an innovative new form factor—a watch
to provide contactless payment capability. After consulting with MasterCard Worldwide, Garanti
decided to move forward with a trial of the new form factor and worked together with LAKS to
further develop the product.
Objectives
By moving forward with the PayPass watches, Garanti hoped to accomplish two primary objectives.
First and foremost, the bank wanted to implement a new and outstanding PayPass device as quickly
as possible to boost usage and win new customers. In the challenging Turkish market, the ability to
deliver this solution ahead of competitors could win the bank market share, and it would help
cement Garanti’s position as an innovator—a critical component of its market strategy. The PayPass
watch provided the desired speed to market since it functions on the existing PayPass platform,
without requiring additional IT development or a new business case.
Second, Garanti hoped to expand public awareness of the PayPass functionality across Turkey, and
the introduction of such a unique and desirable form factor could help accomplish this. Garanti had
launched PayPass in 2006 with an above-the-line marketing campaign, including a series of well
received TV ads. However, as the only issuer of PayPass at the time, the bank could expect only
limited success in educating the public at large about the new payment alternative. Prior to the
launch, only some 600 merchants accepted PayPass, and only 20,000 cards had been issued.
In Turkey, low-value purchases were usually paid with cash. The closed-loop public transit systems—
i.e., systems with a transit-specific payment mechanism that does not include global payment
schemes such as MasterCard—were accessed with a MIFARE® application on a prepaid product.
Garanti planned to use PayPass to penetrate into everyday segments such as these that had not
been targeted by credit cards in the past. This would require the broadest awareness of PayPass as a
fun, convenient, and secure alternative, and the bank felt that the stickers could accelerate the
growth of awareness and uptake.
Challenges
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Contactless payment technology allows a range of non-card form factors as mentioned above. The
challenge is that currently industry standard
personalization systems and hence card issuer facilities
typically only handle CR80/ID1 cards.
The first generation LSTW1 had a SIM card which was
fixed in the watch. So the personalization of the watch
had to be done piece by piece which was not
convenient in mass issuing.
In order to keep the business case for the LAKS Smart
Transaction Watch 2 strong and to give issuers a
minimized impact and fast route to market, LAKS has
worked to develop a watch that can be
personalized just the same as a regular
contactless card. Existing personalization
equipment and personalization processes can be
used. The new LAKS Smart Transaction Watch 2
product uses a small “break-out card” which is
known as IDOOO or SIM-sized, combined with
what we call the “Slide-In System”, this allows
the card to be personalized as normal and
broken out for insertion into the watch. The sub
card is then inserted into the watch where
automatic connection is made to the watch
antenna for use in contactless payments.
Another key benefit of the “Slide in System” is that watches and the cards that enable payment and
other applications can be sold and distributed separately. They can also be easily handled by
cardholders for example when they want a new watch or a new payment product they can simply
interchange the watch and sub card as they wish. This offers unique flexibility when selling watches
and the payment cards that they use and includes the capability to use credit, debit and prepaid
accounts in watches so that there is a product to suit all cardholders and markets.
The Pilot
Covering the entire country, though focused primarily on Istanbul, the pilot was launched in June
2007, utilized the first generation of watches – LSTW 1.
Phase one: marketing.
Garanti employed both above-the-line and below-the-line communications to alert consumers about
the availability of the innovative new form factor. Above-the-line advertising in phase one included a
television commercial and online advertising. The 45-second TV commercial shows a young man
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walking down the street being attacked by a hungry little dog. The dog undresses the man piece by
piece while the man is running into a super market grapping some dog food. Being undressed,
holding the dog food in one hand he stands in front of the clerk. To pay, he simply swipes his wrist to
the terminal, which registers the purchase with a beep. Then he leaves the supermarket and takes
off—much to the checkout clerks’ amazement. The commercial captures at once the groundbreaking
quality of the new form factor, as well as its speed, ease of use, and everyday convenience. The
messaging was aimed primarily at the youth segment.
Below-the-line communications included statement and ATM
messaging and print advertising, as well as e-mail alerts
directed to existing PayPass cardholders. The Bonus Trink
PayPass card has been marketed as the fastest card in Turkey,
and the marketing materials for the watches were built on this
characteristic.
Garanti and MasterCard launched a public relations campaign
that leveraged both the novelty of the new form factor and
the fact that Garanti was the first in the world to implement
it. As a result, consumer and business publications and
websites, both in and outside of Turkey, heralded the launch, providing information on how the
watches work.
Garanti cardholders receive 1% cash back for all “on-us” transactions, with the credit loaded directly
into their account and available for immediate use. A promotion that coincided with the launch of
the pilot offered cardholders five times more cash-back bonus points on PayPass transactions
regardless of the form factor.
Phase one: watches. Consumers were invited to apply for the new watches, which would be
associated with a Garanti Bonus Trink MasterCard® credit card account. They were charged a
nominal fee of YTL 70 (approximately EUR 35,-). Applications could be submitted by mail, in person,
online, or via SMS messaging, and the watch was delivered by mail to cardholders.
Cardholder communication materials that accompanied the watches were prepared to inform users
about how and where to use the watch. It was not a big job as the watch is a self-explaining form
factor.
Consumers simply affixed the watch on their wrist and consumers could make purchases by simply
tapping their wrist on any PayPass terminal worldwide. The initial response to the offer was strong,
particularly among the under-30 segment of the population, and Garanti issued approximately 5,000
watches to applicants within the first few weeks. Given the strong consumer interest Garanti issued
about 20.000 watches till end of 2008.
Phase two: upgraded watches.
Within 24 months after the pilot’s initial launch, LAKS had
developed a new version of the watch. New shape, more robust, and equipped with “SIM card SlideIn System”, designed to meet issuers’ perso request. The new style options will help to drive
consumer interest to a higher level.
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The new LSTW 2 model is right now out – delivered end of January 2010. Marketing will soon start
considering as well Co-Branding partners because watches can be customized.
This opens up unlimited opportunities to market watches and cards both carrying cardholders
favorites, including baseball teams/players, football teams/players, motor racing, fast food, gyms,
music bands, clubs, drinks brands, sportswear brands, designer brands, etc.
Results
Garanti consider the launch of the watches a complete succeed, given the strong consumer response
and the ongoing interest in and continued growth of this for factor.
Watches are taking Away The Fumble-Factor because people wear watches and do not carry them
they always know where they are, this takes away the stress and time spent fumbling for cash or
cards normally carried in a wallet or bag. Even the mobile phone shown as a popular choice often
cannot be located quickly when in a bag, “how many times do people miss calls you make to them?”
A watch is one of the most popular personal accessories with their wearers looking at them on
average around 40 times a day; this represents a massive brand reinforcement opportunity for card
issuers who include their brand on the watch face. Typically cardholders only use their card about 4
times a day, so the watch face represents 10 times the exposure to the cardholder compared with
their card. Using watches as payment devices means for showing innovation and differentiation to
cardholders and competitors. It is a simple and convenient cash displacement tool. Contactless
payment devices have been shown to increase the number of transactions and the amount spent
during each purchase. For customer it means a convenient alternative to cash – a personal accessory
with multiple functions available in an unlimited variety of colors and face designs.
A key value driver for card issuers leveraging contactless cards is “the top of wallet effect”.
Contactless cards have been shown to cause cards that were less used or even dormant to become
“top of wallet” when contactless payment capability is added. The LAKS Smart Transaction Watch 2 is
personalized as what is known as a “companion device”, this is a device that links to a regular
account for which there is also a card, the card may be standard magnetic stripe or contactless
enabled. The LAKS Smart Transaction Watch 2 is designed to reinforce use of the account to which it
is linked by providing a unique differentiator for that account. Suddenly the watch enabled account
becomes more convenient, more useful, more cool in use – this has been shown in research to not
only drive usage of the watch to pay but also to increase the use of the regular card for the same
account.
In addition, the introduction of yet another successful and innovative payment technology
strengthens the bank’s strategic position as the market’s leading innovator, offering a broad array of
personalized payment solutions. The bank also believes that its close association with the new form
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factor reduces any competitors who might issue the stickers to the status of “me-toos.”
Conclusion
There is a core group that likes watches – uniqueness and always on hand.
Consumer interest, indeed, has continued to grow. Garanti offers the watch as one of its standard
form factors for Bonus Trink PayPass cardholders.
Watches are a personal accessory and can be treated as collectible items. Different designs enable
the customer to have more than one watch. The fact that through the “Slide in System” of the watch
cards that enable payment and other applications can be sold and distributed separately strengthens
this business case.
Garanti learned of the first generation of watches where their Bonus Trink logo was prominent on
the watch face to design and offer watches with attractive watch faces and decreased the
appearance of their logo on the watch.
The outcome is well excepted design watches which give contactless technology an emotional boost.
+
Research has shown significant demand for payment capable watches. Watches are worn – not
carried, so they are always, literally, on hand and as a result are easily accessible and rarely lost
compared with credit cards and mobile telephones.
CONFIDENTIAL – ©LAKS 2014