Sunday, October 25, 2009

The A,B,C's of the Prepaid Card Opp

Good look at this massive opportunity that banks have shown only lukewarm interest in while small independent specialists have forged ahead with prepaid card initiatives. The article asks the obvious; "Are banks missing a trick?"; "While banks continue to shy away from prepaid cards, retailers and niche suppliers are embracing them. For financial services, prepaid cards are unlikely to ever be mainstream but there are segments that are arguably well served by these products. The current economic environment should be a boost, given the number of consumers being rejected for credit cards. And the potential for incorporating other forms of technology, including contactless and mobile, is interesting. Ken Howes, ex-Mastercard and now a consultant at Edgar, Dunn & Co, believes the ‘killer app’ would incorporate risk management, reduced cost and revenue generation, with prepaid cards having the potential to fulfil these. Risk management stems from the financial control; cost reduction could stem from areas such as payroll, expenses management and benefits; revenue gains could come from transaction fees, enhanced loyalty and value-added services. The last item is arguably the most important. ‘The issue is, can you generate revenue out of added value,’ he asks.

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