Talking shop with… Kevin Boglarsky

The director of network products for Riverwoods, Ill.-based Discover says that innovative payment options can help grocers build loyalty and boost transaction size

Grocery Headquarters: How has the re­cession impacted payment options at the point-of-sale?
Kevin Boglarsky:
Shoppers have become more financially conservative over the past six to eight months and they are thinking much harder before pulling out their plastic.

The recession has encouraged more consumers to increase debit card usage and this transition is happening for a number of reasons. Consumer credit availability has decreased, leaving less room on credit lines for purchases. Debit also supports a budgeting mentality, since shoppers have a ballpark idea of money available in their checking accounts and they don’t want to overspend.

This point opens up lots of room in the market for retailers to deliver programs that can foster more customer loyalty and provide value regarding electronic payments.

How is Discover helping retailers attract and retain loyal customers?
We have taken on the role of industry partner for supermarkets and other retailers, and offer services to promote convenience to cardholders. One tool is our Cash Over service.

For example, shoppers often make weekly or bi-weekly grocery purchases. They make similar visits to the bank for spending money. Cash Over is a way for grocery stores to eliminate that extra bank trip.

Can you explain the program?
When consumers pay for their groceries with their Discover card, they have the option to get up to $100 back in cash. While this is similar to debit card transactions that consumers have become accustomed to, Discover has offered the Cash Over program since the mid-1990s.

By not having to make an extra stop at the bank or an ATM, we are helping grocers give time back to shoppers. There are no fees to shoppers for using the service, and grocers pay no processing fees for the Cash Over portion of the transaction.

What’s the difference between this and a traditional credit card cash advance?
Cash advance transactions are typically several hundreds of dollars. Cash Over transactions are meant to be a financial supplement; it is a convenience, not a replacement for a cash advance. On average, Cash Over transactions are $40.

How widespread is the service?
The service is currently available across 21,000 retail locations, including grocery stores, warehouse clubs and convenience stores. By end of 2010, we expect to have over 30,000 live locations. Cash Over shoppers tend to use the service either once a week or bi-weekly.

How are supermarkets promoting the Cash Over service?
We provide a marketing toolkit that includes floor mats with Cash Over acceptance information, lane dividers and POS messaging as well as traditional and digital signage options.

For example, as shoppers swipe their credit card at POS, a message runs across the PIN terminal’s screen letting them know the service is available as well as process the transaction.

How is the program implemented?
Discover provides grocers a set of programming specifications that can be integrated within their POS terminals. It is not a difficult integration, but complexity depends on who maintains the terminals.

Many mid- and top-tier supermarkets’ POS systems are tied into their inventory management systems, which makes it easier to control program updates. Since smaller chains and independent stores outsource their POS networks, Discover works with merchants and acquirers on coding.

What are the biggest benefits for grocers?
The biggest is the loyalty factor. Customers who use Cash Over make 75% more visits and do nearly 200% more in sales than customers who don’t use the service. First-time users spend one-third more during subsequent visits than non-users.

Seasoned Cash Over users nearly double their store visits, while new customers visit stores one-third more often than those who do not use it. If chains can get shoppers in once more time per week, that is huge for the chain.

What is next on the horizon?
Discover hopes to use the technology to support supermarkets’ loyalty programs. Specifically, we want to give customers the opportunity to redeem their loyalty rewards at POS before the transaction is completed.

As shoppers swipe their Discover card for payment, the terminal will prompt them to redeem outstanding loyalty points as supplemental currency. It is another level of convenience and another reason to visit their favorite grocer.

We are building this product for retail customers and strongly believe that for supermarkets, this type of loyalty program will increase transaction size.

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