With Starbucks As Inspiration, Mercury Launches a Card And App for Small Merchants

Noting the success Starbucks Corp. has had with its prepaid card and mobile app, Mercury Payment Systems LLC figures the small merchants it serves would like to create a similar program but lack Starbucks’s considerable resources. To bring such a program within reach, the Durango, Colo.-based merchant processor this week announced its Mercury StoreCard, a closed-loop system that lets merchants offer a reloadable card and mobile app along with cash-back rewards, cardholder-customized graphics, social sharing tools, and other features.

“Those features are pretty expensive and not typically available to the merchants we service,” says Travis Priest, vice president of value-added services at Mercury, which processes for about 80,000 small businesses and also works with an extensive network of software resellers and system developers that can potentially reach hundreds of thousands of other merchants.

Mercury will run a controlled beta test of the new system starting next month with about 50 merchants and some consumers. Its plan is to roll out the product by the middle of the year. But Priest says the company has already heard from a number of merchants. “There have been lots of expressions of interest,” he tells Digital Transactions News. “From what I can tell, this is going to be a very popular product.”

The widespread popularity of the Starbucks card and app has a lot to do with that interest, Priest says. Launched with a small pilot in the fall of 2009, the Starbucks app now works chainwide and allows cardholders to use a quick-response (QR) barcode generated on a smart-phone screen to access their prepaid card account. The coffee giant now processes more than 4 million mobile transactions a week, or about 11% of in-store transactions in the U.S. and Canada. Overall sales on the Starbucks card totaled $1.3 billion in the crucial fourth quarter.

The Mercury StoreCard, which will feature merchant branding, will include a QR code that takes customers to a StoreCard portal where they can set up all of the product’s functions, including the mobile app tied to the prepaid account. The app will work with either Apple Inc.’s Passbook wallet or a similar wallet for Android phones.

The loyalty feature is a cash-back capability that lets users earn a percentage back on purchases in the store. Users that fund the card with another cash-back card can double-dip on the rewards. A graphics feature will let users customize the card with personal photos or other designs. Since the card is reloadable, it is intended to be a gift card as well as a payment product for the buyer. “Our hope is the cards will be given out as gifts and [recipients] will start using them as their primary payment card” at the merchants’ stores, Priest says. Users can track both current balances and rewards totals on the app.

Processing for the StoreCard transactions is free for merchants that use Mercury for credit or debit card processing, though the program carries a fee of $30 per month per store. Merchants that are not Mercury processing clients will pay $50 per month per store.

Though the program takes the Starbucks card and app as its inspiration, there is no guarantee small merchants will enjoy the same kind of success, warns Ben Jackson, a senior analyst at Maynard, Mass.-based Mercator Advisory Group who follows prepaid cards. Much depends on how much, and how well, the card is marketed by the merchant, he notes. Some small sellers, he says, may not be able to get a large enough customer base using the card to make it worthwhile.

“If you have a small number of customers using it, it may be cheaper to use a punch card,” Jackson says. “The question is can Mercury’s customers reach out [to their customers] the way Starbucks reaches out?”

Still, the program could succeed for merchants that plan carefully. “If a company has thought it through, the potential for it to make a big difference is very strong,” says Jackson. “But if it’s not well-considered, they’re going to find out this kind of program requires more attention than just turning it on.”