Opportunities in Prepaid
Moving Out of the Box
There is no end in sight for opportunities in prepaid. Continuing advances in technology, the ease of ecommerce, and the use of prepaid technology in travel and transportation, gaming and government, and in money management adds spice to the pot.
Prepaid now serves an expanding consumer base that includes everyone -- employees, college students, soccer moms, road warriors, and the underbanked -- who enjoy the convenience and security of the prepaid financial alternative. Even retirees are using closed loop cards for dining and other activities in their communities.
Also, the evolution of the mobile wallet is invigorating prepaid. On the money management side alone, smartphones can help consumers organize coupons, rewards and loyalty cards, keeping track of spending and staying on budget. There are many opportunities in these areas and we will discuss several.
Mobile Opportunities Just Beginning
In the mobile market, there are real opportunities for both retailers and consumers. According to Vibes.com, when a mobile coupon or incentive is delivered to a consumer, it’s always available, convenient, and ready to use. Recent innovations with mobile wallet marketing — like Passbook and Google Wallet — present marketers with new opportunities to distribute and manage location-aware mobile coupons and offers to improve redemption rates by more than 50 percent when compared to mobile web.
Brands can deliver offers that are both timely and relevant to a consumer’s proximity to a physical retail store. This serves as a reminder of his/her offers, creating urgency and making it more likely that they will stop in-store to redeem a brand’s offers.
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On the payment side, the mobile wallet is one of the biggest opportunities on the prepaid horizon. As the mobile wallet continues to reinvent itself, new prepaid financial services products, such as virtual prepaid cards and other card services will be found contained on the wallet.
Donna Embry, SVP, Payment Alliance International noted in a TPP interview last month, “Mobile is the major driver of future prepaid transformations. I think of prepaid as being the product catalyst that will give consumers a way to test the mobile process. Consumers can segment the money they will use in wallets ahead of a purchase and feel secure in the fact that either their credit card or debit card accounts will not be compromised.”
Carriers Join the Mobile Wallet Party
National wireless carriers have entered the mobile wallet arena. Sprint’s Boost Mobile Wallet, powered by Wipit, lets prepaid wireless users load cash onto mobile devices and then use that value for money transfers, bill pay, wireless top up, check deposit, and more. The company is using Ria’s money transfer network for remittance.
Boost Mobile Wallet users also issued a prepaid debit card linked to the account that they can use to draw funds out of ATMs or make card-based payments. In short, it’s a prepaid bank account on a mobile device.
Cricket Wireless subscribers will be able to pay their bills through Evolve Wallet. PreCash recently announced a marketing and distribution deal with Cricket Wireless, making Evolve Money available to Cricket customers who will have the ability to upgrade to the Evolve Wallet, based on technology developed by PreCash and Cachet Financial Solutions.
Raymond Valme, CEO, Dial World Communications, believes that prepaid mobile continues to build momentum, particularly international mobile top up, noting that we may start to see consolidation among MVNOs in 2014-15. “Prepaid open loop cards and mobile wallets should both gain strength,” said Valme.
James Gentry, COO, Chit Chat Mobile, said that within the MVNO space, it’s not about “me too.” “MVNO’s must find niche markets to be successful, whether it’s identifying specific demographics, B2B or new and emerging markets,” said Gentry. “Opportunities do not exist; they are created.” He also sees a consolidation ahead for MVNOs.
“There is speculation that the likelihood of a merger between major carriers is inevitable. As far as subscriber growth, the market is virtually 100 percent saturated,” Gentry added.
In October, Chit Chat announced that they are releasing bi-monthly plans giving their customers the option to pay every two weeks, unlimited international calling, and broadband.
Banking on Rewards
Consumers have grown accustomed to getting rewards for spending, as shown in certain vertical markets. The airlines have built loyalty through frequent flier miles program and everyone is familiar with that. Many people charge everything on their airline card so they can collect points to go places for free. One loyal customer checking out at Target said no thanks to the Target rewards card. “We have been using our Southwest Airlines card for seven years to pay for everything we buy and we have been to San Francisco for free and other places,” he said.
Doug Bobenhouse, CEO, Synchology, strongly feels that there is opportunity in partnering with brands that earn rewards. Following the airline miles credit card model that earn travel rewards, the same opportunity exists for prepaid to earn rewards through brand partners.
There are a number of audiences that need prepaid, including the Gen Y demographic, comprised of teens and college age kids who are too young to qualify for credit cards and the credit-averse populations that don’t like credit cards. Both of these groups want their spend money to earn reward value, in the same way that credit card holders earn rewards or points for charging purchases.
Synchology designs cards for brand partners, offering a “white label ready” banking platform that puts brands at the front and center of the program. Rewards are conveyed through a point system, cash system (cash back rewards), or account credits. Categories that they are currently targeting are retail, publishing, insurance, associations and small business.
“Retailers usually prefer the point system,” said Bobenhouse. “What we also provide to retailers is trend data so they can learn more about their customers. This gives them more opportunities to improve their offers.” For example, if an apparel store for teens learns that the customer buys shoes at another store in the mall, the retailer can create a partnership with the other merchant.
Bobenhouse sees the other opportunity for merchandising via money management tools and a rewards earning platform that the consumer can use to see what he has earned. The Jump Visa prepaid debit card, Synchology’s flagship program, provides a fully-featured interface that shows the consumers how his money has been spent and the reward earnings that resulted. Folders and tags categorize spend information, receipts, and items that were bought. Ingo, a mobile app, lets consumers load checks onto whatever is a participating Visa Prepaid Card. Users can snap a picture of the check and add it to one of their prepaid cards.
From Travelers Checks to Prepaid Travel Cards
Rêv Worldwide addressed a market opportunity by leveraging prepaid with the airline for New Zealand. Since 2011, Rêv and Air New Zealand have offered OneSmart, a combined multi-currency prepaid travel card, boarding pass and Airpoints Star Alliance rewards card. OneSmart is issued by Bank of New Zealand.
According to Bertrand Sosa, co-founder of Rêv Worldwide, this type of platform for airlines represents the expansion of GPR into the affluent market. “It is a focused strategy in a vertical market and takes prepaid mainstream by combining loyalty and prepaid debit via a global wallet app available to frequent fliers,” said Sosa.
This past July, Rêv and Velocity Frequent Flyer, Virgin Australia’s award-winning loyalty program, launched The Global Wallet, a mobile-enabled prepaid travel card and airline frequent flyer membership card. Cardholders are provided with a contactless prepaid Visa card as well as a virtual prepaid card, both of which are issued by the Australian bank Cuscal.
The Global Wallet offers a choice of 10 currencies, with up to five able to be stored on the card at the same time. iPhone, iPad and Android users can swap money between the currencies stored in their Global Wallet, receive real-time transaction alerts and send money to other people through their smartphones.
The mobile app for the Virgin prepaid travel card was voted one of the top 20 apps by Australian Apple stores.
Sosa said that the Virgin Australia card program is essentially a global wallet. “We combine the frequent flyer program with a multi-currency prepaid debit card that can be used universally,” said Sosa. A Virgin Australia passenger can travel to London and Paris and swipe their card at a merchant in any country as a “local.”
The frequent flier member gets a card from the airline, loads funds via a bank account or through cash. The money is transferred in real time into different currencies, including yen and rupees. Leaving Australia, the travelers load their account so they can make currency exchanges upon arrivals, and earn miles and rewards at the same time.
At Heathrow Airport, for example, the travelers can shop as a “local” by activating the app, toggling to Heathrow, and converting the currency.
Taking GPR another step forward, InComm and Jackson Hewitt, a tax preparation provider, got together and launched the JH Preferred Card in time for the upcoming tax season. The card has no fees for purchase transactions, calls to customer service or card-to-card transfers. JH Preferred enables consumers to direct deposit tax refunds to their card and load cash at more than 50,000 Vanilla Reload retail locations nationwide for a low fee up to $3.95. JH Preferred also offers cardholders rewards, a mobile app and other money management tools.
“Consumer demand for GPR cards is increasing at a rapid rate each year,” said Brooks Smith, president and CEO, InComm. “Our goal is to make using and reloading these cards as quick and easy as possible, while creating stickiness through usage-driven incentives and rewards…”
JH Preferred Prepaid Visa Cards are issued by Sutton Bank pursuant to a license from Visa and can be used everywhere Visa debit cards are accepted.
You can see that technology innovations are driving prepaid into the mainstream and into the affluent market. We can expect to see the prepaid industry broaden through partnerships in vertical markets and for specific purpose uses, such as tax refunds, travel and transportation.
According to David Bakke, Money Crashers, as competition grows in the general prepaid card industry, we should also see more companies lowering or eliminating fees on the accounts of customers. The Direct Express card offered by the federal government comes with relatively low fees.
“You may also see more government regulation in the prepaid industry, such as required FDIC insurance on prepaid cards as well as fee limitations,” said Bakke.
The big banks are also likely to get more involved in serving the low and middle income markets with prepaid financial services products – a demographic that needs more attention. Yes, opportunities are possible wherever people spend money. •