Delaware Merchant Group Launches Gift Card

Maureen Feeney Roser, an administrator for a Delaware merchant group, was not pleased with the administrative burden caused by the organization’s gift-certificate program.
“It was a wildly successful program,” Roser tells ATM&Debit News. “The volume of [the certificates] got to be so much that we were as many as two weeks behind [reimbursing merchants] that accepted the certificates.”
Roser decided a prepaid gift card would better suit the needs of merchants and consumers, and last week the Downtown Newark Partnership launched a program that uses Visa private-label cards. The prepaid cards, which replace a paper gift certificate used since 2003.
The card is closed-loop and restricted for use at certain pre-selected merchant locations. There is no Visa logo or other marks on the card, according to Barbara Hvasta, Maverick vice president of alliance and product strategy.
The association sold its first card Thursday and expects redemptions to pick up after the holiday season, Roser says.
Besides eliminating paperwork for merchants and Roser’s staff, the cards keep funds flowing through Newark’s downtown area. “There was no guarantee the change [the consumer received] from the gift certificate would go to other downtown merchants,” Roser says.
The Downtown Newark Partnership designed the gift certificates for one-time use. If a consumer made a $5 purchase with a $25 certificate, the merchant was expected to give $20 in cash back to the customer. “Now the consumer can go right next door and keep using the gift card,” Roser says.
The cards are free, but cardholders pay a $2.95 monthly maintenance charge after 13 months of nonuse. Consumers can load the card with $10 to $500 in $5 increments.
Seventy merchants accept the cards, and Roser expects more will soon. “We have about 200 businesses in the area, and many probably thought the gift certificates were an administrative burden,” Roser says.
Maverick Network Solutions, a Wilmington, Del.-based independent sales organization, is the program manager and processes the transactions. Palm Desert (Calif.) National Bank issues the cards.
Maverick uses a back-end system for the cards that does not require much from the merchant.
Mercants that accept the card must register their point-of-sale equipment with Maverick using a “merchant enrollment card,” according to Hvasta. Swiping the card through POS terminals enables Maverick to identify participating merchants and approve transactions made with the private-label card, Hvasta says. If the enrollment card is not first swiped, the POS terminal will not recognize the gift card  
“There is no need for the merchant to change anything,” she adds.
Newark is not the first city to use a private-label gift card for its downtown area. In Colorado, Boulder and Colorado Springs each have their own cards.
Like Newark, Downtown Boulder Inc. also used a paper certificate program, from 1994 until 2007, when it launched its prepaid card, according to Dave Adams, deputy of the association.
Downtown Boulder made the switch for reasons similar to the Newark group’s. “It’s been a great sales point for our membership because you know the funds on that card will be spent in downtown Boulder,” Adams says.
Boulder’s card is accepted at more 150 merchants. Overland Park, Kan.-based StoreFinancial is the program’s provider.
Roser says she spoke with Boulder’s merchant association and learned the card has been a success. Downtown Boulder Inc. did not return requests for comment.
The gift cards fit well with what Hvasta says has revitalized the Newark downtown area. The University of Delaware is nearby, and Maverick and the merchant association expect to market the cards to students.