The Green Sheet Online Edition

May 09, 2016 • Issue 16:05:01

Selling Prepaid:
Approaches to prepaid program management

For program managers perhaps the greatest challenge for physical and digital prepaid distribution is structuring organizational support to match business objectives. Another challenge, which is shared by executives across the payments industry, is that managers must also stay abreast of regulatory updates impacting their programs.

One example in the prepaid realm is the Federal Reserve's ECO-Gift Card Act of 2010, which introduced new rules and amended Regulation E of the Credit Card Accountability Responsibility and Disclosure Act of 2009. It disallowed certain fees unless clearly disclosed and extended card expiration to five years from date of issue. The Federal Trade Commission and Consumer Financial Protection Bureau have also weighed in, and new state mandates are posted on the National Conference of State Legislatures' website, www.ncsl.org.

That said, prepaid programs face unique hurdles. "This notion that you have to create mechanisms that can handle funds being preloaded into an account and to now allow those funds to be drawn beyond a positive balance is fundamental," said Seamus Smith, Chief Executive Officer of Sage Pay. "And the creation of issuer-related rules to manage that is fundamentally different from running a traditional credit card or even a debit card account without the draft facilities perhaps of a bank account."

Nonetheless, prepaid offerings today are more expansive. "It has enabled smaller institutions, because there is less risk if managed properly, to come to market with prepaid offerings," Smith said. "We've seen a strong uptake of travel related prepaid products that can handle multiple currencies on one card and deliver competitive foreign exchange rates."

Merchant considerations

Having clearly defined objectives will shape how merchants manage their prepaid programs. In smaller organizations, one person may be designated; but in larger organizations where several departments must interface, collaboration is the favored approach.

First Data Corp. outlines several prepaid management approaches in Secrets to Gift Card Success: Six Proven Program Management Approaches, which are summarized as follows:

• Single ownership program: This is the most frequently used approach. One individual manages all aspects of the program and acts as primary liaison. Excellent for smaller organizations; allows for quick response to market influences.
• Committee centric program: This approach utilizes an advisory board that represents different business units and forms the decision-making body. Best for large organizations; creates transparency and ensures strategic alignment with company vision. Customer centric program: In this approach, the marketing department takes the lead and collaborates with a designated vice president or director. Ideal for businesses that rely on customer market intelligence to inform decisions on product development.
• Cost centric program: When this approach is selected, the finance or accounting department spearheads the program to rein in costs. Excellent for startups or organizations with limited budgets.
• Innovation centric program: Using this approach, the marketing and product teams collaborate to develop "first to market" offerings. Lends itself to merchants with cutting edge products and delivery channels.
• Franchise centric program: Franchise board representatives manage the program. Geared for franchise owners who want to maintain program consistency across locations.

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