Selling prepaid can reap big rewards, but there are lessons to be learned before plunging into this lush space of opportunity. To begin the lesson, how many readers know what a program manager is and what they do? How does the program manager fit into the prepaid ecosystem?
Prepaid expert T. Jack Williams, president of Paymentcard Services, said, “Over the years, the role of the program manager (PM) has expanded from just the marketing of the program direct to the end user, or company who has access to the end users, to everything from anti-money laundering (AML) expert to a processing, clearing and settlement expert.”
“The days of going out and selling a few prepaid access cards is pretty much over,” noted Williams.
PM’s Role in Prepaid Card Programs: Open Loop and Closed Loop
Let’s start with the issuer. Prepaid issuers, including banks and merchants, represent the money behind the product. The issuer, program manager, and processor work together in network-branded prepaid card programs.
The relationship management elements in prepaid processing are extremely important to the overall operations of a card program. The success of any program depends on the issuer, program manager, and the processor, and their collective ability to recognize trends and changes in the market.
“The issuer is the money behind the card, whether it is a bank or a merchant,” said Michael Hursta, VP Prepaid Category Manager, First Data. “In the open loop ecosystem, a program manager acts as the marketing arm, setting the fees and rules, depending on the market.”
Does the issuer always retain the services of a program manager?
Network-branded banks (issuers) that issue reloadable open loop prepaid cards typically contract with third-party partners (program managers) to manage and market their portfolio of prepaid programs.
“The program manager is the party that has a direct relationship with the processor and the issuing bank that issues prepaid open loop debit cards,” said Barry J. Kessler, CEO of Prepaid Resources, a technology and knowledge provider for the prepaid debit industry. “The issuing bank could also act as its own program manager.”
In the case of some banks, the issuer is also the program manager for its prepaid portfolio of cards. The tool to manage the portfolio of prepaid cards is the processing platform.
Starting a Prepaid Card
When starting a prepaid product, there are several options. You can create a brand new product or sell an existing off-the-shelf product. You can engage a program manager to customize and market and manage your product.
Starting out in prepaid requires some thought about what you want to sell and to what extent you wish to customize a product. According to Kessler, you can build and operate your own product for maximum control; engage a program manager to fully customize and manage your solution; or manage products sales channels for a single program manager or an aggregation of program managers. (Barry Kessler, The Green Sheet, Sept. 13, 2010)
Program managers provide numerous services to deliver the product to market and drive consumer acceptance. They work with the processor to obtain reports on velocity and keep track of information needed in time of an audit. Program managers work with the issuer to ensure that all of the regulatory and legal mandates are followed to the letter.
The program manager you choose determines the amount of control you will have over your prepaid product and how it is sold. As a prepaid distributor, you may want a custom solution, rather than a cookie-cutter product. Kessler noted that there are decisions to make about the level of investment and the need for control of the product.
“Maybe you can’t afford to be your own project manager, but when choosing a project manager, you need to know what control you need,” said Kessler. “Different PMs offer different levels of control.”
Managing Closed Loop Programs
In the closed loop ecosystem, the issuer is the merchant, such as Applebee’s or Home Depot. In this scenario, the merchant typically contracts with a processor to manage the technology platform and provide reporting. For example, First Data is a processor that supports about 300 retailers, including QSR restaurants, petroleum companies, and other categories.
“Cards that are purchased online have to hook into a processor,” said Hursta. One of First Data’s responsibilities is to report data based on what they see on their clients’ technology platforms each month, in regard to market trends and the way consumers are spending.
Render Dahiya, CEO, Arroweye Solutions, a card marketing and production partner, works directly with merchants and bank issuers on card production; they also work with program managers. Arroweye’s financial printing experience encompasses both gift cards and open loop GPR cards, specializing in on demand card management.
“The program manager has to be an expert on regulations and processing,” said Dahiya. “Issuers depend on program managers to fulfill the program, to act as a sales force, and to oversee the bank’s auditing program.”
Being Your Own Program Manager
The issuer can be its own program manager. For example, Rush Card manages its card program. It has a relationship with a bank and a processor to provide the technology platform.
Green Dot, a provider of reloadable prepaid cards, is an example of vertical integration. Green Dot serves as program manager for Walmart’s Money Card, as well as for its own branded reloadable prepaid product line.
When Green Dot first entered the prepaid market about 10 years ago, they created a product to serve the unbanked and marketed it in different retail channels, using a processor and an issuing bank. In 2004, Green Dot created its own reload network. The corporation went public in 2010. This year, Green Dot, owned in part by Walmart, decided to start its own bank. Soon after Green Dot acquired eCommLink and became its own processor.
Moving into Financial Services
Every day, financial services on a prepaid card are growing into services such as online bill pay, debit, disbursements, loyalty and incentive. It is no longer just basic ATM and POS access. The program manager provides this array of services via their enhanced API connectivity. With the advent of mobile payments, and the role mobile will be playing in the future, the PM will need to be part of this process as well.
“Mobile is just another access point to the account, just as a plastic card and internet connection,” said Williams. “With this triad of access, and the multiple points of money movement, the PM will be responsible for all aspects of this enhanced connectivity and functionality.”
With some of the legal and regulatory changes that might be coming in the future, the role of the PM continues to change and adapt to answer all of the questions and adjustments that have to be implemented.
How Program Managers Can Find Issuing Banks
The fast-growing nature of the prepaid market has resulted in a fragmented value chain that makes it difficult for prospective program managers and distributors to find issuing bank partners, according to Corby & Company, provider of consulting and program management services to the prepaid industry. To improve the flow of information about banks in the third party sponsorship business, Corby & Company has published an online guide to prepaid issuing banks.
“The disjointed nature of the prepaid space has made it difficult and time consuming for third party program managers and financial institutions to connect,” said Cathy Corby Parker, president of Corby & Company, Inc.
The first version of the guide, published on April 10, includes participation from nine financial institutions that are active in the US prepaid market. Of the participating banks, all but two are below $10 billion in assets and able to extend exemption from the Durbin Amendment interchanges caps to their clients.
Prepaid is still considered to be a fairly fresh frontier with plenty of opportunity, for those that can bear the costs and risks. A program manager can help get your product to market and guide you in all aspects of the program. The best advice is to do your homework and carefully measure your options. •