Prepping prepaid for blast off
s its name suggests, the goal of the Network Branded Prepaid Card Association is to foster and nurture the long-term success of open loop, reloadable, network branded prepaid cards.
This very specific ambition flies in the face of most other prominent associations in the payments industry. The Electronic Transactions Association, NACHA – The Electronic Payments Association and even the various regional organizations are all devoted to the payments industry in general.
But the combined opinion of the individuals and businesses that make up the NBPCA is that the growth potential for network cards made an association dedicated solely to this payments space desirable, even necessary.
The great benefit of network branded prepaid cards is in their flexibility. Since they are branded with one of the four card company logos – Visa Inc., MasterCard Worldwide, American Express Co., or Discover Financial Services – they can be used wherever that particular card brand is accepted, which means just about anywhere plastic is used for payment.
In contrast, the closed loop, private label gift cards – which Mercator Advisory Group estimated to be a little over $60 billion in U.S. load volume in 2007 – are popular but limited in that they can only be used in the store, or store chain, where they were purchased.
Though Mercator predicts steady growth for gift cards in the coming years, closed loop cards, in general, are a more mature market than open loop network cards. In other words, the market sectors for network branded prepaid cards – payroll, corporate incentive programs, health care, government benefits and travel, for example – are wide open for growth.
Mercator sees 22 different categories for network branded prepaid cards and estimates that over $74 billion will be loaded on them in 2008. By 2010, the advisory predicts that figure to skyrocket to more than $181 billion – more than 50 percent growth in two years.
Association mantra
According to Paul Tomasofsky, Executive Vice President and Chief Operating Officer at the NBPCA, that is one of the association's most important missions: to get out the word about potential profits to be made in the network branded prepaid card space. But beyond being an industry advocate concerning the profit motive, the association strives to be an educational and training resource for its members and others in the prepaid world.
"The industry is growing so rapidly," Tomasofsky said. "There really is a learning curve that we need to have people overcome.
"From a government relations standpoint, we're very big on education … so we need to make sure we help to educate from a legislative standpoint. We also do training. We help our members and other folks within the industry on best practices."
Tomasofsky pointed out that the constant turnover of personnel in the payments industry demands that the NBPCA stay on top of all federal and state legislative developments concerning the security and safety of prepaid cards. Twice a month, it publishes Government Update, a four to five page newsletter that updates its members on all the current legislative and law enforcement activities.
Recently, the NBPCA also published a best practices report on anti-money laundering (AML) compliance after 11 months of research by its AML Task Force comprising professionals from all facets of the prepaid industry: card companies, financial institutions, card issuers, program managers, law firms, distributors and processors. The association holds close to 30 meetings a year by phone or in person to keep its membership abreast of all the important issues concerning prepaid cards. It holds monthly meetings specifically on legislation and consumer relations.
Another one of the NBPCA's goals is to dispel some misconceptions about prepaid cards. "Some of the time we see these stories out there where they'll talk about how prepaid cards are right next to the devil when it comes to products," Tomasofsky said. "And we kind of shake our heads and say, we don't see that. … So we try to counteract some of those crazy stories that come out about how evil prepaid cards are."
By the numbers
Occasionally, the NBPCA also sponsors industry research. And the results of two particular studies bode well for the future prosperity of network branded prepaid cards.
In a survey conducted in May 2007 of 600 respondents nationwide, general purpose reloadable prepaid cards had an 88 percent satisfaction rating.
If that number seems like a fluke, consider a November 2007 survey on consumer attitudes toward network branded gift cards in which 93 percent of the 1,788 respondents surveyed expressed satisfaction with the product.
"That's just unheard of in any kind of consumer product," Tomasofsky said.
Come one, come all
Anyone in the network branded prepaid industry can join the NBPCA: marketing companies, law firms, processors, program managers, issuers and distributors. Thirty-five organizations already are members in the three-year-old organization, including all the major players in the prepaid industry, such as the four U.S.-based card brands and the top processors and distributors.
"Really any company that touches the network branded prepaid business can join our association," Tomasofsky said. "We welcome them." Individuals are also encouraged to join, such as lawyers or consultants who would benefit from exclusive, inside information and industry research.
Looking skyward
Tomasofsky, who has over 25 years of experience in retail financial services, recognizes the prepaid card industry's development has been slow and complicated. Getting the infrastructure in place in order for prepaid cards to take off has been a long time coming.
"Investment people like to talk about the long runway," he said. "When some product or an industry has a long runway, you usually get a lot of money invested in that industry, and prepaid has a very long runway." But drag that analogy into the 21st century, and that runway becomes a launch pad. When all the pieces are finally in place and prepaid gets rocketed into space, the blast off is sure to be spectacular.
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