The Prepaid Press - November 15, 2007 - (Page 22)

PAYMENTS November 15 · 2007 - 22 Technology Guide for Capturing Gift Card Market Opportunity By Tom Kleeman swipe type, ultimately affording designers much more latitude in card dimensions and designs. Another common denominator of gift card manufacturing is that all designs require die cutting capabilities. The varying shapes of gift card offerings require better systems that deliver cut-to-print registration accuracy of +/- 0.1 mm. The versatility of die cutting systems to handle changing shapes and dimensions of gift card products has had great impact on gift card manufacturers staying power in the market. Those that have more ﬂexible modular designed die cutting equipment that can interchange sheet with roll fed or interchange different types of dies and different modes of parts extraction, have enabled gift card manufacturers to evolve with market requirements. The so-called “sombrero” card is becoming a very popular design. These are rack cards that have a score line for a break-off ISO CR80-sized card that is contained within a point-of-sale carrier. It has a broad somewhat triangular slot knockout, similar to a hat, for the card hanger that makes it easy to get off a hook, thus, the “sombrero” nickname. offer rapid job changeovers that are important to the short run niche. All of the features used in gift card designs to date hole punches, score lines, perimeter cuts can be made, but with far lower mechanical accuracy than would be possible with other types of tooling. This is due to the tendency of cutting blades to bend or deﬂect while cutting. Card manufacturers familiar with the ﬁnancial card industry usually have little experience with steel rule dies as they are not up to the rigors of strict ISO standards for CR80 dimension cards. However, steel rule dies are often the tooling of choice for less demanding gift card designs and mastering their manufacture and use is an important part of being competitive in the gift card manufacturing niche. Male/female hard tooling can easily create gift cards that do not have internal features such as score lines or internal holes that are common in gift card designs. With these tools, the key technical consideration is the clearance between the punch and die and how far it penetrates into the die cavity. When cutting the thick materials typically used in gift cards (e.g. 0.76 mm plastics), there is a need for considerable clearance between the punch and the die. In most cases, the punch should be smaller than the die cavity hole diameter by as much as 1/10 the plastic material thickness. This general rule nearly always needs ﬁne tuning and the more experienced die cutting equipment manufacturers will make adjustments in tooling design as a matter of course. Progressive dies are essentially two or more tools built side-by-side that create all the cuts, internal holes, score lines, and perforations used in gift card designs in multiple sequential cutting stations. Here, too, the knowledge base of the gift card manufacturer is important, especially when it comes to considering tool progression (center-to-center spacing between two stations in a tool). Progressive tools must be very accurately built to match the step up, and artwork must be similarly matched to this dimension in the printing. Progressive dies cost about 50% more than ordinary male/female hard tools. Progressive dies can be troublesome in that printing must precisely match tool dimensions, or station-to-station positioning will be off, and quality will be compromised. If there are cutto-print registration problems, a progressive die will multiply the rejects. They are also inherently slower, because they involve cycling through multiple stations. For these reasons ,compound dies have come into use. Compound dies are essentially two or more tools built inside each other such that the gift card (including all its internal features and the die cut features of carrier for point-of-sale displays) can be created in one press stroke. This type of die has unsurpassed mechanical accuracy in a fast single step process. But one pays for this accuracy and throughput—generally at a 150% greater cost of a standard male/female die. They also are return-to-web dies, like steel rule dies, and those gift card manufacturers that have equipment with greater versatility in parts extraction and knockout systems have a distinct advantage. Modular dies have been newly created to meet the need to produce high quality prototypes in competitive bid situations, and to ﬁnd tooling for moderate run lengths for gift card products. These moderately-priced dies create the same edge quality produced by hard tooling, but at approximately 1/5 the upfront cost of hard tools and obtained in as little as 1/8 the time it takes to procure hard tooling up to the requirements of many gift card designs. These are often the tooling of choice for many gift card jobs with runs less than 500,000 die cutting cycles. Weighing Competition In North America, the leading companies now established in gift card niches were largely drawn from the ranks of plastics printers, printers of specialty advertising products, and card manufacturers. Each of these companies has particular advantages and disadvantages to consider. Card manufacturers, most of which began in the ﬁnancial card arena, have gravitated to gift card products in reaction to the increasing competitiveness in thin margin ﬁnancial cards. These companies often have most or all of the equipment needed for gift card manufacture-- printing presses, laminators, opticallyregistered high precision die cutting systems, and often automated card inspection systems. However, the models of equipment they use are more or less adaptable to gift card manufacturing requirements based on how open their designs are. Card manufacturers with non-modular designed card punching systems often have to start from scratch and acquire new die cutting systems better conﬁgured for gift card requirements. Similarly, automated card inspection systems that are unable to adapt to non-CR80 card dimensions are not matched to popular gift card design requirements. The main disadvantage for ﬁnancial card manufacturers or ID card manufacturers is their investment in the relatively expensive secure facilities and processes required for ﬁnancial card production. That encumbers them with an overhead that smaller companies outside secure card niches do not have. Familiarity with the interplay of inks and plastics is a strong competitive advantage. All companies that have well-established in-house expertise in plastics printing have strong potential to be successful in this market. This is especially true when one considers that the die cutting system needed to complement this capability only costs about $200,000. Training in operating these die cutting systems is relatively straightforward, usually completed in three days of initial system setups. Printers that have the ability to provide turnkey solutions, both cards and packaging, have a distinct competitive advantage. The maturing gift card market is spawning greater variety in gift card packaging designs, so those printing operations with the most versatile finishing departments have a competitive edge. Companies that have added laser die cutting systems to their repertoire are seemingly limitless in meeting retailers’ need for unique gift card designs and packaging. The U.S. gift card market has proven to be highly proﬁtable for printers, plastics decorators and card manufacturers that supply the gift card manufacturing niche. The capital investment needed to enter the market for manufacturing gift cards are relatively modest, especially for businesses that already have some of the printing equipment and/or finishing equipment used in gift card manufacture. Understanding this market requires a knowledge of the equipment and tooling involved in gift card manufacturing, and the ability to meet market demand for design ﬂexibility. A decade ago, in the U.S., gift cards were a rarity and commonly perceived as a second rate gift choice. By the time the 2005 holiday season was over, this dynamic had changed, and 76% of adults had purchased one or more gift cards. Competitive Edges Equipment for Gift Card Manufacture By some estimates, the total cost of entry into the gift card manufacturing market could be about $500,000 for plastics printing companies. This is not a signiﬁcant deterrent for those accustomed to high cost of sophisticated printing hardware. Gift card manufacturing services could become as competitive as the increasingly price-driven ﬁnancial card manufacturing. Most players in the North American gift card market already had made the needed investment in equipment – printing presses, high precision optically-registered die cutting equipment, laminators, etc. – before they delved into the gift card niche. These companies had been using this equipment to manufacture other products, and many continue to do so. There are many U.S. market niches that are just as fast growing and profitable, such as refrigerator magnets, specialty advertising products, gaskets, loyalty cards, hangtags, etc., that rely on high precision steel rule die cutting systems that are commonly used for gift card manufacture. Printing equipment and processes need to be able to handle plastic substrates. Most gift cards use magnetic stripes to encode data, which requires the type of personalization equipment already in use by ﬁnancial card manufacturing companies. There is no absolute requirement for cards to store data on magnetic stripes, and some major U.S. retailers rely on simpler bar coding to store data. To date, the majority of gift card designs have been limited to wallet-sized cards. This is probably because of the retailers’ desire to have gift cards easily accessible to consumers, and to function as portable mini-billboards. Many gift cards have the same dimension as credit cards, but rarely

Table of Contents Feed for the Digital Edition of The Prepaid Press - November 15, 2007

The Prepaid Press - November 15, 2007 Online Wireless Recharge It's a Wrap for Gift Cards Contents GENERAL PREPAID Prepaid 101: Merchandising Regulatory Rundown: Wireless Broadband, LNP, Internet Taxes, and Stored Value Legislation Guest Editorial: Honest Minutes: "The Times They Are A-Changing" 5 Minutes With Daniel Neal, CEO of kajeet The Legal Line Prepaid Wireless Roundup WIRELESS Wireless in Brief 011 Mobile Launches Mobile International Dialing Hop-on Adds GSM Phone to Product Line Virgin Mobile USA Launches New Services kajeet Adds to Handset Line MarketStar Publishes Mobile Phone Usage Study Nokia and Cellfire Team Up Verizon Selects Firethorn iVisionMobile Launches Messaging Platform Sprint Expands "Unlimited by Boost" INTERNATIONAL Spot Rates NOMAD Brings MasterCard EMS to Europe R&M Finds Potential in Africa International in Brief TELECOM & TECHNOLOGY Caveat Emptor When Negotiating IP Licensing T&T in Brief MySpace and Skype Ink Deal Octastic Announces New Media Gateway DSP Pactolus Selected by Global Crossing Tadiran Announces New Loyalty Incentive Program Oblio Telecom Launches New Prepaid Products Total Call Enhances Prepaid Calling Cards PAYMENTS A Gift Card Technology Guide Pinnacle and PaySpot Roll Out POS/Prepaid Solution TIO Networks Announces Membership Program TransFund$ Partners with TruckersB2B AMR Finds Retailers Returning to Main Street Payments in Brief Diebold to Offer Prepaid Gift Card Technology InComm to Sell nFinanSe Discover Cards iVisionMobile Offers Retailers Mobile Payments i2c to Offer Stored Value Webinars Mobilians Starts U.S. Mobile Payments Operation NetSpend Increases Savings Program Interest EXTRAS Classifieds Contact Us Our Advertisers

The Prepaid Press - November 15, 2007

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