Though the industry is still considered young and growing, Steve Streit, founder and Chief Executive Officer of Green Dot Corp., recalled the very early days of prepaid, when a conference involved 30 people standing around in a hotel lobby, before the term "prepaid" was even invented. In a one-on-one interview with Robert Safian, keynote speaker and Editor of Fast Company magazine, Streit said 10 years ago the term used to describe the product was "host-based stored-value."
When Streit started Green Dot in the late 1990s, only a handful of companies issued such cards. These included American Express Co. with its Cobaltcard, Visa Inc. with its Pocketcard, and cards issued by NetSpend Holdings Co., founded around the same time as Green Dot.
"Certainly in the retail space, there wasn't a retail category or anything like that," Streit said. "We were the first to use the name 'prepaid' as far as I know."
Streit, who was a radio station programmer and executive for 19 years, recognized a niche market in "credit cards for kids" to serve college-age consumers without access to credit cards who needed a way to pay for goods and services on that relatively new technology called the Internet. Green Dot's first product was the MasterCard Worldwide-branded I-GEN card launched in 98 Rite Aid drugstores in the Washington, D.C., area.
Streit said a turning point for Green Dot was in 2007, when it partnered with Wal-Mart Stores Inc. to power the Visa-branded Wal-Mart MoneyCard. Green Dot reported that, as of March 2010, 3.4 million active MoneyCards were in circulation in the United States, making the Monrovia, Calif.-based company the largest provider of general-purpose reloadable prepaid cards in the country.
A pivotal moment for the entire industry came in 2009, when Congress was debating the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (the Credit CARD Act). In a panel discussion, Talbott Roche, President of Blackhawk Network, said the industry was caught "flat-footed" by that first piece of major legislation to target prepaid.
The Network Branded Prepaid Card Association – then only a three-year-old organization – lacked the expertise to educate Capitol Hill staffers and legislators on the industry. The NBPCA asked Roche to spearhead a lobbying effort on behalf of the industry.
With the monetary and human capital of 13 prepaid card companies behind her, Roche and her delegation spent the only time allotted to them – 52 days – educating Congress on how the Credit CARD Act would "decimate my business model and that of many others in the industry, and thereby make these products not available to consumers," she said.
The intense lobbying efforts resulted in lawmakers amending the Act to exempt most types of prepaid cards from the legislation. Roche took away from that experience that Congress is not interested in understanding how legislation will affect the business community, but rather in how consumers will be impacted.
The second lesson Roche learned was the importance of establishing relationships with lawmakers now and maintaining those relationships over time, before that next piece of potentially disastrous legislation is introduced. Roche said attempting to change legislators' minds in essentially one meeting, as Roche characterized what her ad hoc delegation accomplished in 2009, is not an ideal plan of action.
Kirsten Trusko, President of the NBPCA, said the association is much better prepared today to face legislative challenges because of its larger membership base, more lobbying experience under its collective belt, and a proactive mindset when engaging with regulators, legislators and law enforcement. "And that makes a huge difference – to really be out front," she said.
Undoubtedly, a pivotal moment for prepaid card providers has arrived in India. A panel discussion devoted to the nascent Indian prepaid market highlighted prime opportunities abroad. India has an ethnically diverse and literate population of 1.18 billion, with over half of the population under 25 years of age, said Naveen Surya, Managing Director, Itz Cash Card Ltd.
There are approximately 17 million merchants across the country, said James Mifrin, AmEx Vice President and General Manager, Global Payment Options - India. But only 2 to 3 percent of transactions are conducted electronically, he added, which points to a long and profitable "runway" for migrating cash payments to electronic ones.
Furthermore, about 600 million consumers in India own mobile phones; 85 percent of those are prepaid, pay-as-you-go handsets that function as mobile wallets, said Deepak Bhutra, Vice President, Prepaid Cards, India and South Asia, MasterCard Worldwide. According to Bhutra, MasterCard has experienced "huge traction" with travel cards in India, where businesses use the cards to fund the expenses of their employees for travel abroad.
In December 2010, MasterCard acquired the prepaid card program management operations of Travelex, making MasterCard the exclusive card brand for Travelex's prepaid offerings, which include the popular CashPassport travel card.
"Absolutely we believe that prepaid is the way to go in the Indian market," Bhutra said.
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