Smartcards are Edenred's ticket to profits

The Sodexo rival will replace its Ticket branded coupons with smartcards for easier online servicing

The French multinational company Edenred will move from paper-based meal and gift vouchers to a digital system with smartcards to expand its business and turn around its operations in India.

Edenred is present in 40 countries around the world and runs an employee benefit service (with meal and gift vouchers) and a rewards and incentives business under which it develops reward solutions and technologies for clients.

The two streams contribute equally to the company's global revenues. India contributes less than 1 per cent to its global revenues. Edenred had entered India in 1997, and is present in Brazil, Italy and Mexico for over three decades and in France for over 45 years.

STINT IN INDIA

• Edenred operating in India since 1997
• Has 15 branches across 11 major cities
• With more than 500 employees
• Has 3,500 corporate clients
• Atleast 2 million end-users
• Has 29,000 affiliated service providers
• Gets 5 per cent service charge on redemption of vouchers

Edenred's business model revolves around the 5 per cent service charge it earns on the issue and redemption of its vouchers.

In India, its brands include the Ticket Restaurant meal vouchers and Ticket Compliments gift vouchers, which compete with Sodexo in the same space. Sodexo has 10,000 corporate clients of its benefits and rewards service, while Edenred has 3,500 corporate customers.

Edenred also faces additional competition from payment solutions such as ItzCash and prepaid cards from Visa and Mastercard.

With its latest move to introduce a digital system, Edenred hopes to increase both its reach and profitability. In 2011-12, its India revenues were Rs 29.20 crore, up from Rs 25.36 crore the year before. However, its losses, too, increased to Rs 6.9 crore from Rs 2.9 crore, according to a filing with the corporate affairs ministry. Financial data of 2012-13 is not available.

The Edenred senior management is hoping that the switch to the digital platform will help it reach newer markets, introduce more product variations and turn profitable in India. Sodexo, its French rival, too has plans to launch electronic cards and digital solutions.

"India is a part of the group's growth strategy. With the Indian loyalty market in its nascent stage, the overall penetration in prepaid services is only about 20 per cent. We believe the digital platform will be a key to get more clients and beneficiaries in India," says Jacques Stern, the global chief executive officer of Edenred.

The end user will be issued smartcards which will replace vouchers and get topped up online. After Brazil and Mexico, Edenred will introduce these in India and home market, France, this year. The company will infuse additional equity in its Indian arm for the roll-out, says Stern. The digital mode contributes 58 per cent of its global business, up from 51 per cent last year.

A Sodexo spokesperson says, "Sodexo plans to launch electronic cards and digital products for its benefit and reward solution offerings in the coming months. We offer multiple digital and hybrid solutions in several countries."

In the offline format, clients would purchase paper vouchers each month, which had to be distributed to the end users and then redeemed for meals or gifts at merchants'.

"Digital addresses the needs of customers who do not want the burden of logistics of distributing to each of their locations," Stern says.

Not just clients' logistics, Edenred will get some relief in its costs as well. "It is a question of volumes. Ours is a business where we have a lot of fixed cost," Stern says, explaining that the digital platform will drive profits too by cutting such costs.

Its reach will get a boost with its online dispensing as Johann Vaucanson, Edenred India's managing director says. He expects outperforming other markets with 15 per cent of growth by launching products in new cities. At a global level, the company has given guidance of 8-14 per cent growth between 2014-16.  

Stern says Visa and Mastercard are not competitors as they provide access to merchants and card-holders, rather than product solutions. "Their clients are banks and not retailers or corporations. So they don't compete with us for clients," Stern explains.

"With employee loyalty being redefined due to rising attrition, organisations are using a portfolio of monetary and non-monetary methods to build greater commitment," says Nishchae Suri, Partner & Head People and Change, KPMG in India.

"Employee loyalty programmes' popularity, like customer loyalty programmes, reflect the economic situation and are more in demand when the economy is doing well and the pressure on retention high with more competition," says loyalty programme management expert, Brian Almeida.

Online servicing would also make it easier for Edenred to introduce more products as modifications become easier to make and keep track of.