4 Ways Prepaid Program Management is Different Than Credit and Debit
By i2c inc.
Read Time : 05 Min
We just returned from exhibiting at Cards and Payments Middle East (CPME) in Dubai. It was another great experience for the i2c team to interact with our clients and prospects and listen to their needs. We are seeing prepaid exploding in the Middle East with growth in travel, virtual, and government programs in the 40-50% range. It’s becoming one of the top prepaid markets in the world with more innovation and diversification on the horizon.
Our new General Manager, International, Scott Salmon, spoke at the event on “Five Ways to Profitability in the Prepaid Business”. His presentation was met with gratifying enthusiasm by attendees, many of whom stopped by our booth to chat further and pick up a copy of the accompanying white paper (which you can download here, by the way). This reception reinforced a core belief about what it takes to be successful in prepaid – that running a prepaid program is different than credit and debit. The fact that many prepaid card programs have failed to scale in the same manner as credit and debit card programs suggest that some companies have not yet figured out how to crack the prepaid nut.
While there are a number of factors that play into this – everything from consumer familiarity with prepaid products to program managers’ use of ineffective, legacy processing platforms – there are four major areas that prove to be huge challenges. When working with clients, we like to focus on helping them overcome these:
Business Model – Because prepaid cards have lower average monthly spend, lower transaction approval rates, and a shorter lifespan among other factors, you cannot use the same tools and methodology as a credit or debit program to be effective.
Card Holder Retention – Because prepaid cards carry fees and are funded with consumer money, it is important to become top of the wallet and foster lasting relationships. Building in features and services that differentiate your card and provide meaningful value to your cardholders is key.
Definition of the Value Proposition – Prepaid programs must think about how their product stands up – in terms of fees, usability, and extra services – to traditional checking accounts and take steps to widen the appeal of their cards.
Resource Allocation – In prepaid, misdirection of resources – both in terms of quality and timing – can have a devastating impact on the bottom line. If you only make cardholder acquisition your primary focus and don’t focus on creating operational efficiencies, your costs will spiral out of control. The program will fail to be profitable even if strong acquisition rates are achieved. Knowing when and how to balance these investments is the key to success. This is always an area where we try to advise our clients.
Prepaid program management plays an important role in the success or failure of a card program and is one of the key reasons why some prepaid portfolios have struggled to gain critical mass. We encourage you to take a realistic look at how your program stacks up in these four areas. The white paper has more information to help guide you. If we can be of any help in this exercise, please reach out, and let’s work together to grow the prepaid market and your program’s success.
