Prepaid Cards Hit the High Seas: Providing Convenience to Employees, Reducing Fraud and Enhancing Security on Ships
Expert:
Kenneth Goins Jr.
Chief Executive Officer, Brightwell Payments, Inc.
Interviewer:
Crystal Wright
PR & Media Relations Specialist, NBPCA
Kenneth M. Goins, Jr. CEO of Brightwell Payments, Inc. talks passionately about the company's new maritime prepaid card program which brings cruise ship employees a secure, safe, convenient way to manage their personal financial needs while a sea from a computer connected to the Internet, 24 hours a day, seven days a week, 365 days a year. Goins describes how transitioning payroll from traditional cash to the OceanPay prepaid card helps employers reduce fraud, and enhance security on ships and how this translates into smooth sailing for everyone.
Describe Brightwell Payments' new maritime payroll OceanPay® program and the huge need it is fulfilling for the cruise industry?
The OceanPay program is a fully-integrated turnkey solution that solves the unique challenges and concerns of existing payroll processes faced by the maritime industry. The program provides the following features and functionality: compliance with maritime legal requirements; foreign currency exchange services; money transfer services; companion cards; on-board card printing; and free Internet connectivity.
These fully-integrated features allow a crew member to conveniently perform personal financial services from a computer connected to the Internet, 24/7/365, even while at sea. They also offer a hosts of benefits to the cruise industry, including: a fully-integrated payroll process simplification; the security and convenience of electronic payments versus cash; lower payroll processing costs for cruise lines; and improved use of working capital on board ships due to reduced cash requirements. OceanPay is able to make this service available through its business partnerships with its issuing bank partners, Visa, MasterCard, MTN Satellite Communications and Travelex.
To date, the company has approximately 15,000 cards in circulation on more than 150 ships globally within multiple companies in the maritime industry. What has been the impact of moving payroll in the maritime industry from cash to prepaid cards?
Transitioning payroll from traditional cash to prepaid cards has reduced fraud, enhanced security on ships and provided enhanced conveniences for employees. For example, prepaid cards offer enhanced security/fraud reduction. Cards are safer than cash, can be replaced if lost or stolen and additionally, the use of prepaid cards lowers the requirement for cash on board ships. Our cards are flat printed versus embossed to further protect against fraud.
The convenience of being able to use our integrated bank-like functionality enables crew members to avoid spending their free time in ports handling banking needs. Prepaid cards also save crew members money via more affordable and convenient money and wire transfer services. Services are available 24/7/365 and free Internet access is provided along with Visa/MasterCard zero liability protection. Finally, for cards issued through one of our U.S. issuing banks, the card accounts are FDIC insured up to $250,000.
Tell us about how prepaid cards can help other niche verticals similar to the Maritime Industry?
Prepaid cards can help any workers in any industry, domestically or globally, where workers are currently paid in cash, especially if they are located in widely-dispersed geographic areas. Our OceanPay cards provide the safety and security of electronic banking functionality at the user’s fingertip with VISA- or MasterCard-Branded cards that can be used anywhere around the world where those brands are accepted.
The cards also offer cardholders ATM access, online bill pay, card to card transfers, cardholder alerts and the ability to conduct money transfers to over 130 countries.
Looking into the future, where do you see the biggest area for growth for network branded prepaid cards?
Areas for growth include anywhere there is an opportunity to replace cash or checks with the savings and convenience of prepaid cards. Reloadable cards that are used as a replacement for traditional banking accounts, such as GPR and Payroll cards, including maritime, are poised for particularly strong growth in the coming years. We are also likely to see a rise in the use of mobile technology in areas where it can increase functionality for the cardholders.
Attractive alternative to checking accounts: future looks bright for prepaid
Expert:
Steve Streit
Chairman and CEO, Green Dot Corporation
Interviewer:
Crystal Wright
PR & Media Relations Specialist, NBPCA
Green Dot Corporation's Chairman and CEO Steve Streit offers a candid conversation about starting Green Dot in his bedroom back in 1999 and the company's growth today to one of the largest prepaid card providers in the country. Streit describes a dream come true to see the company begin trading shares on the NYSE and believes the future for prepaid looks very bright because general purpose reloadable cards allow users to better control their finances and provide a very attractive alternative to traditional checking accounts.
What was the most exciting thing about Green Dot's IPO and what do you think it means for the future of prepaid?
The IPO was very exciting for us. We spent the day of the IPO at the New York Stock Exchange and watched the first trade of GDOT shares, which was personally an incredible experience for me. I started Green Dot in my bedroom back in 1999 and to see the company begin trading shares on the NYSE is something I could have only dreamed of back then. I believe the future of prepaid is very bright. Consumer recognition of the product has certainly grown tremendously, and with rising fees that many traditional checking accounts are charging, I believe more and more people will see the power of controlling your finances with a prepaid card.
As a pioneer of the general purpose reloadable card, why do you think growth of the GPR card continues to surge and remain popular among consumers?
GPR cards allow users to better control their finances and provide a very attractive alternative to a traditional checking account for many people. If you use your reloadable Green Dot card regularly, you will not be charged a monthly fee, and you cannot be penalized for overdrawing your account. Having that protection is very important to many of our cardholders who have been hit by overdraft fees too many times in the past.
What are some new innovations you’re observing in the industry with respect to branded prepaid reloadable cards?
We continue to identify opportunities for innovative new products and services that can drive usage. Our customer focus has led us to enhance our product packaging and product displays for example, in retail locations so that consumers can be better educated and we can promote our products and services more effectively. Transparency is very important, which is why we put our fees directly on our packaging. We are also exploring new features and services that increase acquisition and retention of our products to various segments of users. Recent enhancements include integrated direct deposit enrollment forms, online bill pay and better online and cell phone account management tools.
Why did Green Dot become a member of NBPCA?
The NBPCA allows us to make connections with others in the industry who are working toward the same common goal, which is to raise awareness of the benefits of the GPR cards. Membership affords us networking opportunities and allows us to work together to move our field forward.
All government eyes on prepaid
Expert:
Terry Maher
Partner, Baird Holm, LLP
Interviewer:
Crystal Wright
PR & Media Relations Specialist, NBPCA
NBPCA general counsel and partner with Baird Holm, Terry Maher discusses the many legislative and regulatory challenges ahead for prepaid. He also urges companies to find ways to have consumers talk about the benefits of using prepaid cards, particularly general purpose reloadable cards to help minimize harmful policies down the road, which may reduce consumer access to a variety of prepaid products.
State and Federal regulatory scrutiny of prepaid products seems to have intensified over the past year. Why do you think that is?
I think two factors have lead to this, first, the economic crisis has lead to much closer scrutiny of financial services providers in general, and banks, in particular, have suffered in their public image. Second, the consolidation of power in one party has lead to a change in regulatory and enforcement philosophy, from a standard of making sure the consumer has adequate disclosures of the terms associated with a product or service to one where the government is going to be more active in regulating the terms under which the product or service may be offered to the consumer. We have moved to a more European model of consumer protection. The formation of the Bureau of Consumer Financial Protection is the culmination of these changes.
How will laws and regulations such as the New Jersey abandoned property law and the Financial Crimes Enforcement Network recently proposed new rule requiring retailers who sell prepaid cards to establish anti-money laundering programs potentially impact consumer access to prepaid products?
The New Jersey law was simply a money grab by the state to fill a serious budget hole. The costs and hassles of complying with the information collection obligations created by the law will cause retailers to question whether it is worth offering prepaid cards in their stores. I suspect many will decide to drop the products from their shelves. As for issuers, the New Jersey law, together with the CARD Act restrictions and the likely impact of the Durbin interchange fee provisions, just puts one more nail in the coffin for single load products, at least from the perspective of the large issuers. I am not sure how all of this benefits consumers in New Jersey.
In many ways, the FinCEN rule, if the final rule looks anything like the proposed rule, will likely have the same impact on the withdrawal of products and services from the retail space. This rule would especially impact consumer reloadable products, which are heavily relied upon by underserved consumers.
As Meredith Whitney recently noted, banks are expected to close around 5,000 branches in the next two years, as revenue losses from the real estate lending fallout and increased regulatory burdens drive banks to increase customer fees and drop marginal products and customers. Whitney predicts a 30% increase in the number of unbanked consumers over the next two years, to 41 million households. These branch closures will most impact communities which are already underserved. If the FinCEN rule drives retailers out of the market for offering prepaid products, unbanked consumers will become heavily reliant upon non-traditional financial services providers, such as check cashers, to meet their financial services needs, including obtaining and loading of prepaid products. What remains to be seen is what impact regulations to be issued by the Bureau of Consumer Financial Protection will have on prepaid.
What can the industry do as a whole to prevent some of these adverse regulations?
We need to work with consumer groups that are focused on the needs of the underserved communities, such as La Raza and the National Urban League, to educate legislators and regulators on the potential harm their policies will have on the underserved communities. In my opinion, working with groups like the Consumers Union is fruitless.
In what ways can companies who are members of NBPCA help the trade association minimize this wave of harmful policies targeted at prepaid?
We need to have consumers of the products tell their stories of the benefits of prepaid, and how prepaid has simplified their lives. Too often, reporters are simply buying the story line of the Consumers Union about how the products are harmful, without doing any critical analysis of the alternatives available to the underserved population.
Government Agencies Find Electronic Delivery of Benefits Faster and More Reliable
Expert:
Ralph Calvano
SVP/GM, FIS
Interviewer:
Crystal Wright
PR & Media Relations Specialist, NBPCA
States and the federal government continue to deliver benefits on prepaid cards. Ralph describes what's driving this growth and what's on the horizon for government benefit cards. He also offers his perspective on the future for mobile payments in the US.
Government benefit prepaid cards appear to growing by the day, particularly in the last few years. What are the main reasons states and the federal government are increasingly using cards to disburse benefits?
FIS is seeing a trend of Federal and State government moving to prepaid cards as a way to reduce internal operating costs associated with managing re-occurring check payments. Government agencies also have found that electronic delivery of benefits is faster and more reliable than delivery of checks by mail.
What kind of savings can be realized when states or the federal government use prepaid cards to distribute benefits?
FIS believes the costs associated with printing, mailing and replacing checks, as well as providing customer service, can be reduced by moving to a reloadable prepaid card.
Looking ahead, do you think most states will follow the federal government's lead and eventually move all their benefits to electronic payments via cards or direct deposit?
A majority of the states have already moved unemployment benefits to prepaid cards such as those offered by FIS. Many states are also moving court ordered child support to prepaid cards. Florida and California are the latest states to move unemployment benefits to prepaid cards. In almost all cases, direct deposit is already offered so prepaid cards supplement the offering by eliminating the need to print checks for beneficiaries that do not have traditional bank accounts.
Mobile payments seem to have taken off in countries like Japan and South Africa. What is the future of mobile payments in the US and will Americans soon be carrying their prepaid cards and other payment access devices on their phones?
In the domestic prepaid market, the use of text and email alerts have proven to be an effective alternative delivery system to the traditional IVR (Interactive Voice Response), web or live agent support. FIS has also seen prepaid mobile applications being deployed that mirror what many banks and credit unions are doing today for their internet banking portals as well as replacing traditional plastic cards for retail applications such as Starbucks. The technology to support mobile payments exists today, but the business case for all of the stakeholders – issuers, mobile operators, merchants, acquirers and payment networks – have not been fully sorted out. FIS believes that adding value to the purchase experience through mobile applications will be critical to drive consumer demand for mobile payments.
Merchants and Consumers Embrace Innovations in Rebate Cards
Expert:
Juli Spottiswood
President & CEO, Parago
Interviewer:
Crystal Wright
PR & Media Relations Specialist, NBPCA
More and more people want to receive rebate cards. As head of a company issuing more than 35 million paperless rebates, Juli explains trends in rebate cards and why being a member of NBPCA adds value to Parago's bottom line.
Parago recently conducted a survey about consumers’ use of rebates cards. What did they like most about using network branded rebate cards?
Customers like the convenience of a prepaid rebate card; no trip to the bank required. The cards arrive active and are ready to use! They also like the security of a card in situations where they are lost or stolen.
What trends are you seeing in the world of rebates?
Since the turn in the U.S. economy, we have seen a vast increase in the use of rebates by merchants. Customers everywhere are looking for a great deal. In a recent survey we conducted, we determined that 93% of consumers surveyed would drive out of their way to buy a product with a compelling rebate. So the biggest trend we are seeing is the increased adoption of this promotional tool. Additionally, we are seeing merchants embrace the innovations we are introducing that are designed to maximize the experience (such as providing customers choices throughout the process and ways to drive the rebate dollars back to the store - a concept we call “recycling rebates”). Rebates are getting the attention of the CMO as a valuable consumer relationship tool rather than being viewed as a necessary evil.
What is the biggest challenge you think the industry will face in the coming year?
The regulatory environment remains a wildcard to the rebate industry as it relates to prepaid cards.
For those companies who aren't members of NBPCA, in your opinion what is the top single reason for joining?
The NBPCA has been instrumental in helping educate regulators about the prepaid industry. Additionally, the nuances of the corporate incentives industry, which includes consumer rebates, has come under the microscope. I would not want to be sitting on the outside looking in and hoping that the NBPCA was looking out for my part of the industry. I am comforted knowing that I can help shape and influence the outcomes that affect my company.
Forging Ahead Amidst Change
Expert:
Jonathan Palmer
Chairman, NBPCA
Interviewer:
Crystal Wright
PR & Media Relations Specialist, NBPCA
With over 35 years experience in electronic payments and financial services, Jonathan predicts general purpose reloadable cards will drive the future growth of prepaid. He also talks about the critical need for industry to educate regulators and lawmakers about what prepaid is and how it works from rebate, gift and health benefit cards to reloadable and travel.
As NBPCA's new chairman of the board, what do you believe will be the biggest challenge facing the industry in the year ahead?
The main goal of the NBPCA is to foster a business environment for prepaid cards that is optimal for all – consumers, business users of prepaid and our members. This year a major challenge will be working with regulators to help shape the regulatory changes that will result from the recently enacted financial reform law.
In your opinion, what segments of the prepaid market are poised to drive the industry's growth?
General purpose reloadable cards of all types will continue to lead the growth of prepaid. Consumers are finding GPR cards to be increasingly effective as money management tools, and I see continued dramatic growth of payroll cards, GPR cards delivered at retail locations, government benefit cards and more.
What is the one thing you think lawmakers and regulators don't fully understand about prepaid cards?
I think lawmakers and regulators don't fully grasp the value prepaid cards offer consumers, particularly the unbanked/underbanked population, who literally need the cards to participate in the financial mainstream and an economy increasingly reliant upon electronic payments. By working to educate the public on the value of prepaid and by helping build consumer confidence in prepaid cards, the NBPCA continues to address concerns among lawmakers and regulators about all types of prepaid cards. Also, the NBPCA works to educate lawmakers and regulators on the strict controls – Bank Secrecy Act/Anti-Money Laundering compliance program and other requirements – the industry must follow and about prepaid issuers’ adherence to high standards in fraud prevention, detection and risk management.
Why is it critical for companies to become members of NBPCA?
As a member of the NBPCA, a company has access to a wealth of information, best practices, education and networking opportunities with other members that may be vitally important in insuring a company's compliance with the rapidly changing regulatory requirements. This multitude of resources NBPCA offers, including a single industry voice on Capitol Hill, makes the association well worth the price of membership. Membership has grown almost 50% in the last year, and in my view any serious player in prepaid ought to become a member of the NBPCA.
Looking Back to Look Forward
Expert:
Marilyn Bochicchio
CEO, Paybefore
Interviewer:
Crystal Wright
PR & Media Relations Specialist, NBPCA
Prepaid expert Marilyn Bochicchio shares how NBPCA has grown over the last five years, why it is effective and fills a need in Washington, DC that no other company could alone. We learn why it's important for the industry to speak with one voice and the regulatory hurdles that lie ahead for prepaid.
As one of NBPCA’s founding directors, in your opinion how has the trade association grown over the last five years?
What’s most amazing to me is that the NBPCA has become the “go-to” trade association for prepaid, and is recognized as such by government entities, law enforcement, legislators and consumer groups. As the industry’s premier trade association, NBPCA fills a need no single commercial enterprise can. Its work can’t replace individual work of its members, but it amplifies the voices of its members — for the benefit of all.
During the economic turmoil of the past 18 months and the resulting Congressional scrutiny of financial services, NBPCA has been effective in communicating the prepaid message. The reason NBPCA has been effective is because of the support of its members and the willingness of members to tackle tough issues. Trade associations by their nature can be a messy business, and progress is measured in inches, not miles. NBPCA has come a long way in a short period of time. Even when consensus is not possible, we are all better for having participated in the discussion.
In today’s regulatory environment why is it important for a company to join NBPCA?
There are two aspects of NBPCA membership. First is what the association can do for your business. As a member, you become a prepaid insider, with access to an amazing amount of insight - particularly in the government area - that enables you to anticipate legislation and regulation that may affect your business.
Second is what you give to the organization through your participation. As the collective voice of the industry, you make our sliver of financial services stronger and more influential. I always remind prospective members, the more you put yourself out there and participate in NBPCA, the more you get out of membership. Yes, you will be called on to “work,” but your business will receive an exponential return on your investment. This isn’t a club. It’s an advocacy organization that depends on its members’ knowledge and connections.
Considering the new Fed rules on gift cards mandated by the CARD Act and Congress nearing passage of a massive financial overhaul bill that will impact prepaid, what do you think the next regulatory hurdle will be for the industry? And what should we do to prepare for the next assault?
I think it’s very important to note recent regulations that have impacted prepaid, and upcoming ones are the result of a perfect storm of events. Neither the original CARD Act nor the financial overhaul bill actually targeted prepaid. We were unintentionally swept into the fray. Sen. Schumer used the fast-moving CARD Act to include prepaid as an amendment to a bill he previously introduced. Because of the anger directed at Wall Street in particular, he was successful. I don’t think anyone was thinking of financial reform in terms of prepaid. Financial reform — when it happens — could have a significant effect on the profitability of prepaid products that derive a significant portion of revenue from interchange. We’ll have to wait and see there. There are a couple of items that are clearly in the cross hairs, and the industry can’t ignore them. The first is potential regulation around GPR products. The industry knows this is coming. We don’t actually know how the Fed will define GPR — but we know it has an appetite to examine whether certain consumer protections should apply to these types of prepaid products. In terms of “what do we do to prepare?” I think the writing is on the wall. The industry needs to be out in front of this issue and begin educating regulators on the fine points of GPR products including, possibly, the business model with insight into the economics. Industry best practices would be a very useful tool to bring into these meetings. The second item has to do with AML issues. This is a no brainer, as we’ve been waiting for FinCEN to deliver its proposed regs since Feb. 22.