DIY CARDS CUT COSTS

Kristi Ellis

WASHINGTON -- Safeway and Target are cutting electronic transaction costs by focusing on their own store card programs.

Dennis Stokely, director of cash management, Safeway, Pleasanton, Calif., said alternative card programs, such as Safeway's debit program, are catching retailers' attention because of the cost savings. He spoke last week here at Food Marketing Institute's Retail Electronic Payment Systems Conference, at the Hotel Monaco Downtown. "When we expanded the Vons program with our Smart Check program, we got the speed of a PIN [personal identification number]-based debit transaction with no interchange fee," said Stokely. "When you look at the key components [in the cost of payments], about 90% of the money goes to the issuing bank."

Safeway also cuts costs because the program does not require the same recordkeeping associated with a credit card or signature-based debit card, according to Stokely.

Target's Visa chip card program currently has an enrollment of 10 million credit cards, according to Tom Swanson, controller at Target Financial Services, who also spoke at the FMI conference.

Customers can use the card in all Target stores for payments and bonuses, as well as in any other store for payments.

"Some people asked whether we joined the enemy, and we said no we did not," said Swanson. "We are taking more market control of our Visa destiny and our own Visa card."

He said Target's own internal credit program is not viewed as a cost, but rather an income.

"There is a huge spread with our own Visa card, which is an income generator vs. other cards, which are an expense," he said. "There is a significant cost differential between third-party cards vs. a company's own card."