Sramana Mitra: I don’t doubt that it is of value to those small businesses. What I doubt is how it is a profitable model for you to cater to that segment, given the business model you described – that those merchants need to pay you for the value you are creating for them.
Kelly Passey: The way we look at it is that we already have 320,000 merchants under contract today, and they use us to drive traffic for sales through our promotional model. We have those merchants relationships already, and now they are asking us for additional services.
SM: So these are the same merchants who are already working with you and accessing your distribution channel and your relationships with enterprise customers, and it is those enterprise customers who are paying you in that model? Now the same merchants are turning around and asking you for loyalty program services?
KP: That is correct.
SM: That is a different point of view. But I still didn’t get an answer to the question I was asking before. Each time you went into a different direction, but each time it was an interesting direction. Let me illustrate the scenario for you, and then tell me how you would deal with it.
Let’s say I am a merchant who has a product that caters to small businesses and entrepreneurs. If you look at the technology universe, we have gone through a major shift in the business where most technology vendors were selling technology to large enterprises – at best medium enterprises. The small business market didn’t have a lot of access to technology. But with cloud computing and the Internet, technology has become vastly more accessible to small businesses and entrepreneurs. However now there is a huge number of offerings. There are web hosting services, accounting services, payroll services, marketing services, training services, etc. There are 25 million small businesses. All these merchants who cater to those 25 million businesses and who are helping them run their businesses are also looking for channels, like the kind of channel you are offering.
Let’s say Intuit was your client, and you would take 80 to 100 vendors who cater to the small business universe, and you want to do some sort of a loyalty program for Intuit that offers discounts and incentives from those merchants or the Intuit customer base. Would that be of interest to you? So do you have any enterprise partner like that and do you have merchants that fall in that category?
KP: We don’t today. You are calling those entrepreneurs, small businesses and merchants in a way. I look at those as service providers into the small business community. We had a few of those reach out to us saying: “You guys have 320,000 merchants in the U.S. and we have this great service. So we have insurance to help small businesses do that. OK, Access, go sell our stuff.”
SM: I am not asking if you are selling that. I am asking if you have enterprise partners who close the loop on that triangle.
KP: We don’t partner with any of those service providers today.
SM: You don’t partner with any of the service providers and consequently you don’t partner with any of the small business credit card or banking service providers, who may be offering something like that?
KP: Not today. Today in our model, while there are service providers out there doing social media, we are as well. There are providers out there providing mobile services for small business merchants. We do as well. In most of those instances, we are not being a B2B2C type of partner. We are building our own platforms and systems that make sense for us. If it makes sense to us to take that out to our small business merchant, we will do it.