The Opportunity
First Interstate Bank of California (FICAL) was one of five founding owner of INTERLINK, an online, real-time, PIN-based Point of Sale debitcard program. As an owner, they had the responsibility to participate by allowing their 1.2 million ATM cardholders access to INTERLINK merchants. Bank of America, Wells Fargo and Security Pacific had made the strategic decision to pursue merchant access, an essential component of the INTERLINK program. Bank of America contracted with ARCO and allowed wholesale merchant sponsorship through ARCO’s PayPoint system. Crocker Bank and FICAL had decided not to pursue merchant activity. The Principal owner of Keystone prepared and presented a plan to FICAL for their participation as an INTERLINK merchant sponsor, highlighting an “Annuity of Nickels” in the form of incremental transaction fee income. FICAL management accepted the proposal and funded the project.
The Result
A small project team was assembled and produced the product specifications. Technical resources were assigned and eighteen months later the program was live, interfacing seamlessly with FICAL’s merchant credit card transaction processing. The core technical solution piggybacked on First Interstate’s 14 western state ATM network, which drove the internal, fully burdened, costs down to $0.012 per INTERLINK transaction. INTERLINK’s acquirer (merchant-side) fees were $0.015 allowing FICAL to charge a $0.05 fee per transaction and still generate a healthy ROI. FICAL’s price to retailers was half the price of the nearest competitor.
The project team changed focus and became the leading edge sales force targeting key large retailers and specialized terminal functionality. The team sponsored Chevron, the U.S. Postal Service, British Petroleum, Harmon Management (the largest franchise of Kentucky Fried Chicken with over 100 locations), Stop & Go Markets and AMC Theaters.
The “Automated Box Office”, a mobile standalone terminal that issued movie tickets and concession vouchers, was designed and implemented for AMC Theaters. That program was awarded the “Best Idea of the Year” by Los Angeles Magazine.
The Project Team also negotiated licensing agreements with Modular Data (a predominant southern California credit card processor), Buypass (acquired by Concord EFT and now part of First Data), Manta (a spin off of Lucky Supermarkets now part of First Data through their acquisition of Buypass), GE EFT Services and EFNET (an Australian start up processor operating in the U.S.). These processors added hundreds of retailers each month to FICAL’s merchant INTERLINK program.
Several years after implementation of the initial program, it was reported that the “Annuity of Nickels” had indeed happened. $94 million in revenue had been collected — a nickel at a time. A resounding success in product development and project management.