In mid September 2014, Capital Prepaid Services launched BlazePays, a general-purpose reloadable (GPR) prepaid card that targets the "unhappily banked." Jay Kurian, President of CPS, characterized this growing consumer group as traditional banking customers who are seeking an alternative. "They may have had a formal relationship, but that formal relationship did not fulfill their needs," Kurian said.
The primary consumer demographic for GPR cards remains unbanked or underbanked individuals who cannot afford, or are otherwise shut out from, basic banking services. But that reality is changing, as more so-called mainstream consumers, with moderately higher incomes than the financially underserved, are opting out of mainstream banking for alternative products that essentially provide the same services.
Evidence for this shift in the market comes from 2012 Federal Deposit Insurance Corp. data cited by CPS showing that the general GPR card user is a Caucasian female, 42 years old who, 95 percent of the time, is an English speaker. Additionally, 67 percent of these users have children in the home, 58 percent are employed and 75 percent have annual incomes under $50,000.
Kurian said this demographic group is growing. CPS points to Visa Inc. data compiled in 2011 saying that the U.S. GPR card market will represent $1.2 billion by 2018. Unbanked and underbanked consumers will still make up the bulk of that volume ($778 million in 2018), but the unhappily banked will represent the second biggest user group, at a healthy $274 million by 2018. "It is a very good marketplace," Kurian said.
Founded in 2011 and headquartered in Sioux Falls, S.D., CPS is a sister company to bank-focused portfolio management and managed services provider Capital Card Services Inc. CPS is able to leverage CCS technology to provide the entire BlazePays program. "Competitors are program managers, or they are going to be processors," Kurian said. "But we provide the program management, the marketing and distribution, the issuer servicing, the processing. So we take care of everything soup to nuts."
CPS is offering the BlazePays card primarily through banks and credit unions, as consumers apparently become GPR card users mainly through the institutions where they can't get traditional accounts.
"As the consumer comes through the door of one of our financial institutions and applies for a checking account, 50 percent of the time they're having to decline these people," Kurian said. "Either they don't exist on the [credit] bureau or they have issues with prior checking relationships."
So, instead of banks turning away these potential customers, they can be offered the BlazePays card, Kurian added, and over time "incubate" these customers into full-fledged accountholders.
BlazePays is Visa-branded and currently issued through two South Dakota banks: First Savings Bank of Beresford and First National Bank of Ft. Pierre. The GPR card can be topped up via the Visa ReadyLink network of over 50,000 locations in the United States, including Wal-Mart Stores Inc. outlets.
A main feature of the BlazePays program is the related mobile app, as CPS is also targeting younger consumers with the solution, namely teenagers and college students who utilize smartphones seemingly for all aspects of their lives, including their financial lives. According to the Visa research, college students and teenagers will account for $100 million and $51 million of GPR card usage volume, respectively, by 2018.
"Most of the demographic is moving toward smartphones," Kurian said. "And as that is happening, we're more and more enabling their ability to do things in a mobile environment."
For financial institutions, CPS is also able to provide robust back-end analytics on the details of how programs are functioning. "We can take the consumer data that belongs to the issuer and show them where they are using [the card] and how they are using it," Kurian noted. "And also from there we can look at the financial aspect of issuer profitability and what segment of customers are they getting. Are they getting branch traffic or are they getting direct deposit, government services?"
Finally, CPS "wraps up" the BlazePays program with managed customer services, underwriting and compliance. "We provide a total solution," Kurian said. "We don't just give you a card and say, 'Well, it's enabled; now you can issue it.' We provide you with everything."
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