Fiserv Inc. has developed a reward program designed to help small financial institutions combine the reach of issuer-funded rewards with the lower costs of merchant-funded ones.

Several processors have developed merchant-funded programs for their clients, which often lack the resources to fund their own rewards. But the programs sometimes allow cardholders to earn rewards only through purchases made at participating merchants.

Fiserv said Tuesday that it is trying to address that issue with its UChoose Rewards program, which lets financial companies offer issuer-funded or merchant-funded rewards — or a combination of the two.

"We wanted to make sure that the customers had the widest variety of choices. We wanted to make sure that they would get points no matter where they used the cards, and we wanted to get involved with merchants," Paula Vincent, an assistant vice president and the debit card manager at Central Pacific Bank of Honolulu, said in an interview Tuesday.

The Central Pacific Financial Corp. unit, which did not previously offer debit rewards, is introducing a "blended" version of UChoose for debit cardholders this week. Ms. Vincent said her company had considered other issuer-funded and merchant-funded programs but liked "the fact that Fiserv would be handling everything," including access to national and online merchants.

Andy Brown, the vice president of product development for Fiserv's electronic funds transfer processing unit, said many community banks and credit unions looked at developing their own reward programs face similar access problems.

"Especially with the merchant-funded rewards, if you look at the Fiserv client base, a lot of smaller financial institutions … don't have enough scale to warrant a merchant-funded program all by themselves," he said.

Blended programs can alleviate issuers' funding costs while increasing cardholders' perceived value from their card use, Mr. Brown said. "You're almost double-dipping — you're getting points for card usage" and for shopping at participating merchants.

Central Pacific Bank is one of six Fiserv clients that tested UChoose; five chose a blended version, and the sixth opted for a merchant-funded version, according to Mr. Brown. (He would not identify the five other companies.) An additional "25 to 30" clients have expressed interest in UChoose.

Fiserv will eventually offer the program as a stand-alone product to financial companies that do not use its debit or credit processing services, he said.

Fiserv developed UChoose with Affinity Solutions Inc., a New York company that has designed merchant-funded reward programs for First Data Corp. and Metavante Technologies Inc. Bridge2 Solutions Inc. handles the Fiserv program's reward redemption.

Participating companies can customize UChoose to let cardholders earn points for credit or debit purchases, including both signature or PIN debit. Ms. Vincent said Central Pacific Bank is letting cardholders earn points for PIN debit purchases, because it wanted to ensure cardholders "were using the cards anywhere."

Fiserv said institutions will also be able to adapt UChoose to offer "relationship-based" rewards for multiple types of banking products, so that customers can earn and compile points for opening accounts or applying for loans.

Large issuers like Citigroup Inc., Bank of America Corp., Wachovia Corp., and Capital One Financial Corp. have introduced such rewards, which analysts consider an important growth strategy for debit programs.

Mr. Brown said UChoose's "relationship-based" features would provide another advantage to small banks: helping them compete against large issuers.

"Look at the ThankYou network for Citibank," he said. "I believe that what we've put together is very similar and can compete with those types of programs."

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