Prepaid debit/credit cards are the latest and greatest in the suite of value-added products that acquirers are gravitating toward. These loadable cards are a new and convenient way for consumers to access funds, make purchases and complete payments. Acquirers are offering their merchants the ability to activate prepaid debit/credit cards on the same terminals they use for card acceptance. They are used like other debit cards (check cards) and can be reloaded over and over again through a network of POS terminals or over the internet. The opportunity for acquirers is to use prepaid debit like any other value-added product. Marketers sign merchants, employers and communities (universities, malls, etc.) to distribute these cards and make recurring revenue upon activation and use. Marketing prepaid debit/credit provides a new “lead-in” product, an up-sell opportunity, or the reason to revisit an old prospect for the sales representative.
    Recently I sat down with Al Urcuyo, Chief Executive Officer of CardMarte a Los Angeles, California-based turn-key solution provider of stored value cards. Urcuyo explains it simply, “The card is a debit card. It operates like any other debit or check card. The card is prepaid with the loaded monetary value stored on the card. The prepaid value loaded on the card can be used by its owner at PIN-based merchant locations for purchases and ATMs worldwide. Purchases or cash withdrawals are deducted from the transaction account until the loaded value is spent. The card can be loaded over and over again.”

    The target consumer markets for prepaid products are:

• An individual who has less than perfect credit or does not qualify for a bank account.
• A person who does not want to carry too much cash.
• Individuals who want real-time, low-cost money transfers.
• Parents who want to give their children secure and limited spending capabilities.
• Cardholders who would like to budget their finances.


   Since these cards store and transfer money, they can be used to facilitate other types of transactions including:


• Funds transfer
  Individuals may transfer funds from one card to another or replenish a card in real time. The recipient simply goes to their local ATM and can access cash.
• Payroll
  Employee funds may be dispersed onto these cards, decreasing payroll distribution costs, simplifying bank reconciliation, reducing fraud and eliminating lost check cancellation and replacement.
• Gift & Loyalty
  Cards can also be used for gift and loyalty purposes within a community such as a university or shopping mall.

    The vast market for these cards presents outstanding income potential for acquirers. Marketers of prepaid can derive revenue from the issuing-side of interchange. Additionally, fees are generated from card issuance, transactions, transfers, replenishment, unused funds and various other account fees. The key to making this program work is making the cost of entrance to the merchant or end-distributor as close to zero as possible. Utilizing existing POS terminals or low-cost, stand-alone terminals with multiple methods and locations for replenishment is the key to success.
    Urcuyo has numerous examples of acquirers and resellers making thousands of dollars a month. “Prepaid is a product that leverages ISOs locations, brings more people to a merchant’s store and is a profit center for the entire distribution channel. A well-positioned prepaid debit product should be a profit center for all parties involved - that includes the merchant. When a prepaid debit card is sold by a merchant, everyone should benefit from the commissions earned on the usage fees charged to the cardholder. The income potential from this activity can be enormous. My company pays commissions on more than ten commission lines to all parties involved including merchant, sales rep, ISO and acquirer. For example, if a merchant sells 3,000 cards during a period of a year then the merchant should make more than $15,000 per month. If an agent secures ten merchants that sell 3,000 cards, the agent will be compensated on 30,000 cards and their stated commissions would be more than $30,000 per month. Like anything new, the margins are good today, but are expected to shrink over time as competition heats up.
    Prepaid is one of the hottest new value-added products in the acquiring space and it is worth your time investigating the opportunity. The money is there for the acquirers who learn to market these cards properly. As with any product, there are good partners and bad partners based on your market focus and capabilities. Chose wisely, carve out your niche and you may be on to your golden nugget.