Goins points to the initial public offerings of Green Dot Inc. and NetSpend Corp. in 2010 as signs of a maturing market. Consumer awareness and use of prepaid cards continues to grow, which Goins said proves prepaid cards are becoming an increasingly popular alternative to credit and debit cards.
But with heightened popularity comes heightened scrutiny. Federal regulators and consumer protection advocates are zeroing in on prepaid. For example, Consumer's Union, the consumer protection advocate, has issued reports critical of the industry. But Goins believes Consumer's Union is painting prepaid with too broad of a brush.
One thing the industry can do is a better job marketing the products and "demonstrating the relative value of these cards," Goins said.
Federal law, such as the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act, affects the closed-loop gift card market. The new regulations on escheatment and expiration dates has made the gift card arena a problematic one to operate in, Goins said.
"It's just not the same game as it was before," he added. "It's more difficult to be profitable with those cards… So it's certainly not getting our attention as much."
The effects of the creation of the Consumer Financial Protection Bureau (also mandated by the Dodd-Frank bill) on the prepaid card industry are unknown. "It's a new entity and it doesn't perhaps have the same degree of checks and balances as perhaps other [agencies]," Goins said. "It has a certain amount of power that is really untested at this point and nobody really knows how it will be used. So we have to be cautious of that."
Goins hopes the influx of Republicans into the new 112th Congress will bring more balance to the political process and quiet the emphasis on "landscape changing legislation."
"A certain amount of legislation and regulatory oversight is always good, but it's got to be in balance," he said, with both Republicans and Democrats shaping laws that are not too one-sided.
Goins recognizes mobile payments as another landscape changer for 2011. A natural synergy exists between smart-phone-based payments and prepaid card accounts, he said. A target market for general-purpose reloadable prepaid cards are unbanked consumers who don't have bank accounts, and thus do not have access to debit cards to conduct electronic payments. But, as Goins stated, many if not most unbanked individuals carry cell phones.
"So the triangulation of those people, the cards and cell phones is a natural place to create opportunity," Goins said.
It's a period of experimentation in the mobile payments arena, as players enter partnerships and joint ventures to develop m-payment applications and solutions. "Some will be successful, some will not," Goins said.
He figures it to be a two- or three-year process for the industry to learn what works, at which point consolidations will gain speed around that business model.
Speaking of consolidations, MasterCard Worldwide's Dec. 2010 purchase of Travelex's London-based prepaid card program management operations directly affects PPS as it uses that Travelex division to distribute and market its maritime prepaid card program for the Travelex OceanPay Payroll Card.
Goins called the purchase a bold move by MasterCard and indicative of where the market is heading, as the card brand is venturing into unfamiliar territory as a prepaid program manager. It is evidence that the boundaries that define businesses are beginning to blur, Goins said.
He likens the changes taking place in prepaid to the movement of plate tectonics, as businesses "start to move together" to gain operational efficiency and market scale. As the market continues to mature, the rate of consolidations will speed up, which will create disruptions in the industry, he said.
Over the last 10 years, the industry has been "kind of moving along on its own way, everybody in their little boxes," Goins said. "And so, all of a sudden, some of those boundaries are changing."
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