A prevailing theme among speech makers at Prepaid Expo USA 2010, held in Las Vegas from Feb. 22 to 24, concerned the potential for prepaid cards to lift up financially underserved individuals worldwide, while allowing industry stakeholders to flourish at the same time. The three keynote addresses given at the expo hit on the notion that prepaid cards embody the ideal of the win-win scenario.
The first keynote delivered by Arkadi Kuhlmann, Chief Executive Officer at Internet bank ING Direct, focused on how the prepaid card industry can rebuild consumer trust in financial services. He argued that predatory lending practices and hidden fees had given financial services a bad name. But it hadn't always been so. "There was a time when credit cards were actually loved by consumers," Kuhlmann said. "Then some guys came along and said let's hijack this loving product and turn it into a consumer finance machine and basically push opium on consumers. ... Your job and mine is to turn them around again; consumers can love a card."
Kuhlmann offered ING as an example of how a financial institution can change a negative perception by being upfront and honest with its customers. ING views itself as a retailer offering customer-friendly service, rather than a bank that calculates "what consumers are willing to pay for if they have to," Kuhlmann said.
ING has taken a democratic approach by not playing favorites with its customers - no special benefits or preferential treatment is afforded some customers over others. It also doesn't outsource its customer support or use an interactive voice response system, although such cost cutting measures could save ING money. Kuhlmann explained that customers appreciate the personal connection of talking to actual ING representatives.
ING's alternative approach to banking has apparently been a success. Kuhlmann said it has attracted 8 million customers in nine years; it reaches 100,000 potential customers monthly and, of those, sets up close to 5,000 with new accounts.
Because ING is an Internet-only bank and doesn't have physical bank branches, it opened several cafes across the country where individuals can get coffee and engage ING professionals in conversations about money matters. The cafes are not designed to take deposits or enroll accountholders, but just to talk about money, he said. "Where do consumers hang out and talk about prepaid cards?" he added.
That provocative question dovetailed with Kuhlmann's main objective with ING - to help people save and manage their money more wisely. Therefore, a tremendous opportunity exists for prepaid players to "turn a product into a cause," he said.
The cause of Bill Clinton, founder of the William J. Clinton Foundation and 42nd President of the United States, is to help impoverished countries reach self-sustainability. His keynote address outlined the three "profound problems" of the modern world: inequality from country to country, instability due to such concerns as terrorism and the global financial crisis, and unsustainability exemplified by the United States' energy policy.
"Can we find solutions that reduce inequality and instability and unsustainability, where people can actually make a good living doing it?" Clinton said. "And I believe that you [the prepaid card industry] are key to that."
Clinton said prepaid cards can have a positive impact by:
In conclusion, Clinton compared the zero sum game, where there is only one winner, to the nonzero sum game. "In an interdependent world, we have to look for more nonzero sum games, where there can be more than one winner," he said. He believes the prepaid card industry can play an important part in that endeavor.
The final keynote address was delivered by Robert L. Johnson, founder of Black Entertainment Television. In 2001, Johnson sold BET to global entertainment company Viacom Inc. for $3 billion. Johnson leveraged that windfall to set up his holding company, The RLJ Companies, for which he serves as Chairman.
Under the RLJ umbrella, Johnson rolled out several business entities focused on serving minorities in urban America. One of those companies is Orlando, Fla.-based Urban Trust Bank, issuer of the Urban Trust Success Visa prepaid card.
Johnson recognizes that millions of urban Americans, including African-Americans, are "struggling to fully participate in the American dream." He cited a study conducted by the Economic Policy Research Institute that said the median net worth for African-Americans is $11,800, compared to $118,000 for white Americans. When home equity was subtracted, African-Americans had $300 in net assets while white Americans had $36,000.
Add to that disparity the estimated 60 million adults, representing roughly a quarter of all U.S. households, who don't have access to bank accounts or rely in some part on nonbank financial services, such as check cashing and payday loan businesses.
"These services often come with a high cost," Johnson said. To cash checks, customers pay $39 on average, according to Johnson. Then to pay bills, individuals without checking accounts purchase money orders, which Johnson said can cost $1.50 plus postage at post offices; to pay five bills, therefore, unbanked consumers must fork over $8, not to mention the fees associated with money transfers.
So the people that utilize such services can least afford it, which gives impetus to Johnson's mission to provide urban Americans with low-cost, transparent financial products. "We believe prepaid products are a key part of that same mission," he said.
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