"Vesdia racks up revenues with rewards" by Lori Johnston of the Atlanta Business Chronicle

Atlanta – January 22, 2010

Plastic helped Vesdia Corp. earn cash in 2009.

CEO Jim Douglass said the Atlanta-based company doubled its revenue last year as cash-strapped consumers sought ways to shop or travel with rewards points, companies desired to boost their loyalty and rewards programs, and merchants looked for new ways to improve sales. Although Douglass declined to disclose exact revenue, he said consumers purchase about $650 million annually in sales through the loyalty marketing programs it runs.

Vesdia matches card companies such as SunTrust Banks Inc. and Citi with merchants ranging from Macy’s to Lowe’s to AMC Theatres to online stores, offering ways for consumers to earn more reward points with each credit card purchase.

“We run consumer rewards programs that help influence shopping behavior for financial institutions, airlines and hospitality-related companies,” he said. “Even with the headwind of reduced spending per account in our business, we doubled the size of our business. More banks, airlines and hospitality companies have stood back and said, ‘Hey, we want to add these merchant-funded rewards programs to our existing programs.’ ”

Merchant-funded networks are the next phase of card-based loyalty programs for consumers, experts say.

“It’s a way for merchants to help fund the cost of these programs at a time when the financial institutions are particularly needing that and looking for ways to demonstrate greatest possible value to the consumers,” said Tommy Marshall, a loyalty industry expert and director at New York-based Capco, a global provider of consulting and managed services to the financial services industry.

Marshall said financial institutions are expected to spend an estimated $1 billion in 2010 to manage these programs.

“We’re in an economic time, I think, that makes these rewards programs more important than ever,” Douglass said. “Consumers are always looking for more currency when economic times are bad.”

The consumers earn more points, the banks generate more credit card volume, and the merchants see incremental shoppers and sales, Douglass said.

Vesdia, which began in the early 2000s with BabyMint, where online purchases helped shoppers save for college, increased its number of clients by 50 percent in 2009.

It has about 75 employees, up 25 percent in the past year.

Most retailers pay rewards from 2 percent to 10 percent of the transaction amount. It works like this: If a shopper spends $100 in Sunglass Hut, for example, he or she gets 5 percent of the transaction cost (or $5 in value) in rewards points plus 1 percent of the transaction amount (or $1 in value) in points from the bank or card company. The rewards can be redeemed for plane tickets, hotel rooms, cash back, or the purchases of gift cards, merchandise or other items.

The inception of merchant coalition programs is a little more than 10 years old, starting in Canada, the United Kingdom and Australia, Marshall said.

“All the participants in the network would help fund the actual points that the consumers were collecting,” he said.

Vesdia started changing its model in 2005 to market its services to banks such as Citi. As networks of merchants started to evolve, financial institutions and card companies began to “supercharge” their programs with more rewards, Douglass said. By early 2008, he said all the banks wanted to add merchant-funded solutions.

“We’re using the merchant offers to influence consumers to go shop,” he said.

SunTrust has seen more frequent card use and larger transactions as customers shop at more than 700 online, catalog and in-store merchants in its network, said Stef Anderson, first vice president of loyalty and rewards. It chose Vesdia from among five or six other companies because it had the right reporting tools to show merchants that their participation in the program can increase their shoppers, right approach and right mind-set, Anderson said.

“As you add merchants to the network, what started to happen in the minds of the cardholders, is that card comes out more often,” Anderson said.

Even when a cardholder isn’t sure if a retailer or restaurant is in the program, they will choose to pay with the cards because they “don’t want to miss out on those bonus points.”

About Vesdia Corporation

Vesdia Corporation is the single largest provider of loyalty marketing and multi-channel merchant network services. Through its leading merchant-funded rewards programs and patent-protected technology, Vesdia offers a full array of loyalty solutions to financial institutions, affinity groups and merchants enabling customers to earn more meaningful rewards faster. For more information, visit www.vesdia.com.

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