Prepaid card processing complexity mirrors the many uses of the cards themselves, according to a TxVia Inc. white paper. InApproaches to Processing Technology for Prepaid Cards, TxVia compares prepaid processing to traditional credit and debit card processing. While the latter are "homogenous products commercialized primarily by a single type of [financial institution], prepaid cards represent tremendous complexities," TxVia wrote.
Among the intricacies are breadth of card products; variety of marketing strategies and distribution channels; diversity of players along the value chain; divergent business models, value propositions and risks (categorized by product, vertical market and distribution method) for each stakeholder; differing technology infrastructures and operational support requirements (by the three categories mentioned herein); and rapid change and evolution due to early days in prepaid.
Since prepaid card processing is an involved and idiosyncratic endeavor, trying to reengineer existing credit and debit platforms to handle prepaid card transactions is a losing proposition, the paper states.
"While retreaded credit card platforms may give the appearance and perception of viability for prepaid card processing, their utility diminishes beyond the most basic prepaid card products offered through simple channels," the report states.
According to TxVia, the two fundamental ways to process prepaid cards are to either use software-as-a-service (SaaS) platforms outsourced by third-party vendors to issuers and program managers (PMs) or to use in-house software platforms offered by software vendors and deployed internally by issuers and PMs.
TxVia believes most SaaS platforms are not as flexible as they need to be to meet the demands of prepaid card processing. Outsourced SaaS solutions are dependent on the "one size fits all" model, according to the paper. "Third-party processing is considered by many to be a material weakness of the industry," it states.
On the other hand, TxVia found that in-house software solutions are often marketed as providing greater program control (meaning greater flexibility) than SaaS offerings. Additionally, in-house systems are thought to provide long-term price reductions in comparison to SaaS. But TxVia asserts that both claims are false.
In the prepaid sphere, "in-house software solutions only provide the illusion of control and cost savings," the paper indicates. Said systems are often modified credit and debit card processing systems that are not tightly integrated to meet the singular demands of prepaid processing. Thus, retrofitted legacy systems typically ends up causing "out-of-control" integration expenses, according to TxVia.
The solution put forth by TxVia is the platform-as-a-service (PaaS) approach. TxVia, which is a purveyor of PaaS, contends that the platform marries the best of both worlds: It can be an outsourced solution like SaaS, or it can be deployed in-house. That flexibility is accomplished by what TxVia calls model-driven architecture (MDA).
The upshot of MDA is that it involves templates that can "quickly and efficiently create highly customized processing platforms to meet the specific needs of each client," TxVia said.
TxVia's "template library" allows a business to build its own processing application based on its own processing requirements in the areas of data flow; work flow; service level agreements; cardholder, customer service, administrative and other Web sites; and Web services application programming interfaces. In conclusion, TxVia asserts that its PaaS service, which it believes is the first such solution for the prepaid card industry, "provides a fundamental decoupling of the technology, product and operations value chain so that overall complexity is reduced and organizational parallelism is increased."
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