Prepaid Cards, Beyond The Gifting

Prepaid cards are perhaps most commonly thought of as gifts, or as conduits for payment for those who are unbanked or underbanked. But prepaid cards are also a way to complement traditional payment methods, such as debit and credit cards.

In one recent announcement spotlighting the flexibility of prepaids, i2c, which offers up integrated commerce and payments solutions, said that it has linked up with Kiwibank, which is the largest prepaid issuer in New Zealand. The partnership aims to expand Kiwibank’s prepaid programs, which run the gamut from gifts to travel cards. And it is this latter offering, in travel, that offers some insight into just how cards and electronic payments can be used on a global scale across time zones and currencies.

In an interview with PYMNTS’ Karen Webster, Scott Salmon, general manager of international sales at i2c, said of Kiwibank that “a lot of people don’t realize that they were the first issuer globally of a multi-currency prepaid product,” he noted, stretching back several years ago. “They’ve always been regarded as kind of best practice, best-in-class.”

“New Zealand is a smaller market,” continued Salmon. “It’s analogous in many ways to Canada in terms of the level of advancement and the concentration. There are millions of cards that are out [in New Zealand], and they offer both single-layer gift products to the consumers and corporates, and there are also multi-currency travel products.”

Salmon said that his firm is finding that the “feedback that we get from Kiwibank and other clients is that, because of the flexibility and reliability of our platform … and one of the reasons why Kiwibank selected us … is helping them migrate in a seamless way into the world of digital.” That extends across currencies and mobile apps, said the executive. Cardholders, he added, are able to customize the services that are available to their account. Purses can be configured and eliminated at will, with Salmon noting that that “allows the cardholder to have full engagement.”

Webster noted that prepaid cards in the United States are usually predicated around gift giving or traditionally used by the unbanked. But, she noted, prepaid is tied to a a very different set of use cases outside the U.S. “Prepaid is used in many different cases,” said Salmon, “whether it’s done online, whether it is doing virtual accounts, gift cards, corporate incentive cards, even disaster relief.”

“On the corporate side, what Kiwibank has done is use the self-service portals for the corporate clients. So, as opposed to before, with those clients having to go in and put an order in with the bank, now, they can have their own web service module and, in real time, find out about their portfolio and manage their business. We provide that on a white-label basis … It’s a nice complement, not only on the consumer side but on the corporate side as well.” Value on the corporate side, said Salmon, can come as a company “has employees that travel around to a lot of different countries.” There’s also advantages for issuers, who make some margin on FX fees many banks charge, at around 3 percent, “depending on who the issuer is. For networks,” he continued, “it’s their core capability which is making sure you can use the card anywhere in the world.” Salmon said that his firm can do the currency conversion on a daily basis, on an hourly basis or in real time.

There is also the ability to increase engagement with their cardholders, and this is where the concept of using prepaids as a complement to more entrenched payment methods comes in. The challenge of prepaid runs the gamut of getting people to get the card and, once they have it, to activate the card, and then, ultimately, to use it. He pointed to his firm’s loyalty module, which allows for extraction of any data on the system to show where and how and when customers actually use those cards. The module, he said, allows financial firms “to create campaigns, or messages, or alerts or offers to an entire customer base, to a segmented customer base and even one individual customer.”

One product that offers new use cases for prepaids, said Salmon, is the multi-currency travel card. Simply put, according to Salmon, “it’s a single prepaid card, and you can add multiple currency purses to that single card. In this case, you are coming from New Zealand, and you want to make a trip to Paris and to New York, so using your mobile, you transfer funds from your New Zealand primary account into your U.S. dollar purse and your euro purse, and when you go out on the trip, if you buy a sweater in Paris, we see that transaction coming in, and we see it is euro, and we debit the euro purse.”

“And in New York, you would buy a book, and we see that is a U.S. dollar transaction, and we would debit the U.S. dollar purse. And there are a lot of different value propositions here for consumers and businesses alike.”

Among those value propositions: getting to lock in currency exchange rates on their cards. In New Zealand, savvy Kiwibank customers, who typically are the best credit card holders, also have the prepaid cards in hand to use the latter for leisure activities. “These are financially solvent people,” said Salmon, hypothetically stating that it “could be that a family is traveling to Rome. Mom and dad want to go to the theater, and the kids want to get pizza. You can get supplementary cards and give the kids the card, and while you are at the theater, you can actually see on your mobile whether the kids got pizza or if they are out shopping at the mall.”

Salmon said other use cases could take the place of using, for example, a credit card, and typical practice for the prepaid travel card would be to use two cards, with one to be kept in the hotel safe, and if that card is lost, there’s a replacement in hand. In another use case, funds can be transferred in real time, for example, to a college student with a supplementary card, studying abroad.