Monday, March 17, 2008
Interview with Ron Zanotti, Dynamic Card Solutions
Ron Zanotti is vice president of sales and marketing for Dynamic Card Solutions (www.instantissuance.com), a developer of software that financial institutions use to issue credit and debit cards and to assign the personal identification numbers (PIN) for those cards. Headquartered in the Denver suburb of Englewood, Colo., DCS signed its 375th customer earlier this month. Zanotti recently took a moment to discuss his company's growth and direction and the space in general.
How long has Dynamic Card Solutions been in business? How did it get its start, and who's responsible?
Ron Zanotti: Dynamic Card Solutions was officially formed in March of 2005, but we actually operated as a division under our parent company for about eight years before that. That's when we took our instant-issue product, CardWizard, to the marketplace.
We launched CardWizard in July of 1997, selling to both commercial banks and credit unions. We grew the business pretty well over that eight-year span, and in March of 2005, we basically spun the CardWizard out of our parent company, Dynamic Solutions International, and formed Dynamic Card Solutions.
We created CardWizard in response to DataCard, which is the largest manufacturer of embossing equipment to the financial industry. They brought us their newest product, called the DataCard 150i, which was designed to do in-branch instant issue. We sort of embraced that concept as a new trend, as a better way to issue financial plastics to the marketplace. From that introduction to the machine, we developed the CardWizard application, and we've kept building upon it for the last 10 years now.
Explain instant issuance. How does the process work, and what are competing forms of card distribution and replacement?
Ron Zanotti: The whole concept behind instant issue is to produce the permanent plastic in branch, at the time of customer need. So if a customer walks in and opens up a new checking account and indicates that they want a new debit card, our service provides the ability to select a new PIN, in branch, and a new card, in branch.
With competing technology, the customer walks into the branch, opens up a new account, fills out an application for a debit card, that debit card gets mailed to the customer, and then a PIN mailer gets sent as well. What we do is eliminate that delay and the need for that service bureau—card production, mailing, etc.
What percentage of the banking industry utilizes instant issuance?
Ron Zanotti: We specialize in the instant issue of Visa, MasterCard, AMEX and Discover brand of plastics. I would say that probably only 5 percent of the marketplace is currently doing that. So there's obviously tremendous growth potential for us.
Do you foresee a lateral move into other markets, such as the instant issuance of retail gift cards or government IDs?
Ron Zanotti: Our company's background has been in application software to the financial industry. Could our technology be adapted to do driver's licenses and other types of card issuance? Most definitely. Is it something we will get into in the future? Potentially. But, right now, our primary focus is providing this benefit to the financial industry.
Which do you issue more, credit cards or debit cards?
Ron Zanotti: It's pretty much debit cards, the reason being is debit cards are the primary instrument tied to checking accounts, which are the most predominant form of account that consumers have.
Does that mean debit cards have surpassed credit cards in consumer spending?
Ron Zanotti: Yes, but it's pretty close. If you look at the payment mix on cards, about 53 percent are done on debit, 47 percent are done on credit.
The payment industry in general is divided three ways, almost equally. About a third uses plastic (debit or credit), another third uses cash, and the remaining third uses checks. Plastic is continually increasing in popularity, however.
In addition to the CardWizard application, your site lists quite a lot of hardware. So you peddle more than just software?
Ron Zanotti: Absolutely. We're a value-added reseller for a number of product manufacturers. We sell PIN pads, encoders, embossers, flat-card printers and other equipment that fits nicely into our market space. The CardWizard is the application that links all of those appliances.
What we try to do, when forming a good, solid relationship with the customer, is we try to be a single-source provider of the entire solution. From a product mix standpoint, the cost is probably 70 percent hardware and about 30 percent software. That's the current mix.
Based on the figure you gave earlier, some 95 percent of your space is ripe for the picking. How are you converting them into customers? /p>
Ron Zanotti: We've just launched a new platform, branded the CardWizard FCP 20/20, which we've filed a patent on, where we can actually issue fully personalized plastics, in branch, off of a single card stock.
What that means is, with the embossers in the past, financial institutions had to ship pre-printed plastics to their branches. If they issued three or four different cards, such as Standard, Gold, or Platinum, they'd have to ship three pre-printed inventories out to each branch location. Then, based on what the customer qualified for, they'd have to insert the correct plastic into the machine.
Now, we've created a platform that literally creates the fully personalized card, including full-color graphics on the front, with whitestock, a blank piece of white plastic.
Through our CardWizard application, the FCP 20/20 pulls the personalized info—the mag stripe data, any chip data, front and back images, the card number, card holder name, expiration date, CVV security codes, all of that stuff—it pulls them and prints them onto the whitestock to produce a fully personalized, fully compliant card.
It was very hard for the larger banks to manage the old embossing platform. The logistics of the whole operation—the administrative issues with cardstock and ordering and balancing—were always a problem. Now, with this new technology, they can embrace it a lot easier because all they do is send out white plastic to the branch.
What's on the horizon for credit and debit card technology? Are contactless cards the wave of the future? What about “smart” cards?
Ron Zanotti: Both are sort of on the horizon. In the domestic market, the contactless card is the upcoming trend.
What the major issuers of plastic want to do is make the buying experience as easy and fast as possible. By embedding a chip into the plastic, it eliminates the need to swipe the card through a magnetic reader. With the contactless, all you have to do is tap it on a pad, and all the data is transferred instantly. It just makes the payment experience faster and easier for the consumer.
By offering such convenience, the issuers believe the card will be used more times than just cash and check. Financial institutions are literally trying to get people to stop using checks and cash, and instead use cards.
Why do they care what consumers use to buy stuff?
Ron Zanotti: If a customer writes a check, it costs the bank or credit union money to process that piece of paper. This is usually around five cents per check. Additionally, checks take time to clear since they aren't a real-time, electronic process in most cases. A bank must also continue to pay interest on an account while a check makes its way back to the bank to be deducted from the account balance.
On the other hand, banks pick up interchange revenue on every debit/credit card-based transaction. This translates to, on average, 1.35 cents on every dollar spent. So a $50 purchase would return about 67 cents to the issuer. That sure beats paying a nickel for each check transaction. And since it is an electronic transaction, it's deducted from the checking account immediately. And since banks pay interest on minimum daily balance, they pay a lesser interest amount, as well.