By Jeffrey Shavitz
We have heard of prepaid cards for years, but perhaps we do not fully understand the prepaid sphere's potential: how merchants use prepaid programs, the profitability opportunities and other features surrounding this growing business.
I'm going to focus on one prepaid service Charge Card Systems Inc. is starting to offer more frequently to our merchant base: a "mobile top-up."
A prepaid ("pay-as-you-go") mobile phone works by adding credit in advance of service use. Users are able to "top-up," or reload, phone time using a variety of payment mechanisms. Are you starting to see an opportunity for MLSs?
Many people in the United States have chosen, due to numerous circumstances, to carry a prepaid cell phone with a set limit of minutes. The demographics for this customer base include teenagers whose parents want to control their childrens' cell phone use; people who cannot afford to buy a phone with a traditional monthly plan; people with poor credit who couldn't get service from main wireless carriers; and many individuals in ethnic groups who stay in touch with family and friends working and living abroad.
Whatever the reason, the prepaid phone business is here to stay and is growing exponentially. By 2003, the number of prepaid accounts exceeded contract accounts. By 2007, two-thirds of all mobile phone accounts worldwide were prepaid accounts.
Advantages of a prepaid plan may include lower cost for low usage (for example, phones kept on hand in case of emergencies) as well as the ability to control spending. Prepaid phones come with fewer contractual obligations – for example, no termination fees, freedom to change providers and fewer restrictions on contracts.
Depending on local laws and carrier guidelines, prepaid phones are available to those who do not have permanent addresses, landlines or credit cards. And for people worried about Big Brother, users of prepaid phones are anonymous. Â
Having spent the past few months learning about this space, I've discovered that MLSs haven't embraced the opportunities in the prepaid market and, conversely, sales reps for prepaid don't understand the opportunities that exist within the larger merchant services industry. Â Charge Card Systems recently started working with some of its MLSs to beta test the benefits of offering prepaid top-up services to merchants. The response has been very positive, especially in neighborhoods where businesses already sell other types of prepaid products and services.
Greg Keough, Chairman and Chief Executive Officer at mobile payment provider RegaloCard, stated that a big opportunity exists for salespeople from both industries to work together. "There is a credit card terminal, which is valuable real estate, sitting in the merchant's establishment that can handle numerous functions (credit/debit and prepaid), which ultimately will make that merchant relationship more 'sticky' and more profitable for that salesperson," he said. "Many credit card processors do not offer prepaid services, although they could do so easily and generate greater profit from their existing installed POS units."
If the retailer has an existing POS terminal, we can easily add this top-up feature to it, so that when the user provides his payment card to add $50 worth of time, the card is swiped and the balance is automatically added to the phone. The top-up can occur in many ways, with the most popular being payment with a credit or debit card.
The other way users add minutes is by purchasing a top-up or "refill card" at a retail establishment. The cards are stamped with a unique code (usually under a scratch-off panel) which must be entered into the phone to add credit to the existing balance. Minutes can also be added via open-loop prepaid cards featuring mobile refill services.
The benefits to MLSs of offering reload services through the POS and via prepaid top-up cards is that you can add incremental sales for very little additional work.
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Like many of you, I am new to the prepaid game. But this market space may be synergistic to your selling efforts. Good luck, and if you have any questions, feel free to call me from your prepaid cell phone. 
Jeffrey Shavitz is one of the founders of Charge Card Systems Inc. He is also an active member of The Green Sheet Advisory Board and the First Data ISO Advisory Board. He can be reached at jshavitz@chargecardsystems.com or 800-878-4100. For additional information on CCS, please visit www.chargecardsystems.com/gsadvisoryboard or the company's corporate website at www.chargecardsystems.com.
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