Andy Orrock talks about what it really means to be responsible for authorizing transactions in his recent blog post titled 'Now, you're the switch.' Assuming the responsibility for the final authorization means you end-up being a possible weak link in the long chain of participants. Some good food for thought.
David Bergert continues the discussion and shares some successful models with his follow up post titled 'Now you’re the Switch — Successful Implementation Strategies.
Viewing the world through the same window pane doesn’t necessarily mean we’ll see the same things. Gray clouds could mean cool relaxing weather to one person and to another, the end of the world. I’ve recently been involved in long discussions about what ‘Card Management’ is and what a Prepaid Card Management System (‘CMS’) is supposed to do. After a series of intense discussions with my colleagues (I could very well be the only one that saw the discussions as ‘intense’) I realized at many different levels, we were not only saying the same things, we were framing ideas based on our experiences in different verticals of the prepaid issuing space including issuing bank, acquirer and the prepaid third party processor.
This post will cover what I believe to be essential, high-level attributes of a solid Card Management System for prepaid issuance.
What is Card Management? The phrase ‘Card Management’ is actually an inaccurate use of words for someone that comes from the area of the prepaid space that requires the CMS to not only manage the life cycle of cards, but programs, products and business entities such as program managers and other sales channels associated with issued cards. I guess a more accurate phrase could be “Everything you need to run a prepaid business as a service provider or third party processor system.” That would make the acronym – EYNTRAPBAASPOTPPS. Thank goodness CMS is in play here!
Robust APIs CMS needs to interact with the authorization host to retrieve transaction data for business use. CMS will also need to communicate with external systems for supporting services such as ID verification, OFAC, card fulfillment, IVR and others. (may vary depending on program type i.e. payroll, gift, general purpose)
Hierarchy Management Being able to create an account, mail a card out, authorize a transaction and settle is as important as oxygen but is not all there is to the business of prepaid. Associating business entities at different levels enables business owners to analyze, measure and report on important portfolio data.
Program & Product Management Assigning hierarchy levels and product attributes from a single UI is important in my opinion. Think about how the business comes together starting at member sponsorship on through card issuance. Program and product configuration within CMS should be representative of this process.
Card Life Cycle Management Card issuance, account creation, account activation, self-service cardholder support, CSR support and alike. Everything that happens after all the business relationships and entities are in place.
Reporting and Billing In most cases this will happen in separate system but should be configured and delivered either through CMS or in partnership with CMS. Establishing fees, reporting revenue based on business entities is what brings it all together. Keep in mind that the reports I'm referring to are outside of what the authorization host typically delivers to the issuing bank as part of the third party processor's responsibility.
So there you have it. The world through my CMS window pane. What's your view?
Today I had a wonderful conversation with a Peter Quadagno of Quadagno & Associates, Inc. Peter was generous with his time and shared some of his experiences in the prepaid and payments space. Tons of experience and insight. It turns out Peter has a great looking blog with gobs of great information. Click on the image below and enjoy!
A few months back I had an interesting run in with a fellow member of a prepaid related forum. Reason: He was upset with me for adding a link to my blog in a forum post. He stated how he thought by referencing my blog in what I considered a relevant discussion, I was "polluting" the integrity of the forum by self promoting. My initial reaction - I was pissed and wanted to respond with a few paragraphs in retaliation. But then I realized I would be contradicting the philosophy we all enjoy. Blogs, social networks and forums are all driven by users and users define and shape how these applications are used. More importantly, they provide an outlet for people who dare to speak out loud on thoughts, opinions, experiences (personal or professional) and all things life. There are rules but no rules.
Seth Godin comments on blogging:
“...It doesn't matter if anyone reads it. What matters is the humility that comes from writing it. What matters is the meta-cognition of thinking about what you’re going to say.”
To my angry forum associate: I am humbled. I respect your opinion. I come in peace.
To Andy Orrock and Dave Bergert: Thank you for introducing me to the world of blogging.
"Recalculating...recalculating." Today I must have heard those words 50 times! I was lucky enough to pick up a rental car while visiting D.C. that had a GPS from what looked to be from the 80s because this bad boy was about the size of my laptop and looked and sounded like an Atari game system.
It was a such a frustrating experience for several reasons. First off, the GUI on this thing was hard to read. It was like looking at the blip on the screen of a submarine radar. If my co-pilot made blipping sounds with his mouth we would have been hunting red October. Secondly, it would beep and say "turn right" too close to when we actually needed to turn right. A few times we almost died because of this. Timing was not cool. And lastly, the control panel layout made it hard to toggle between main menu items. I vividly remember the panic setting in when my navigation officer hit the wrong button and miss roboto starting speaking French. We eventually made it to both our destinations safely and on time. Good thing we left early.
As frustrating as it was, a program manager in the prepaid space will feel a more serious level of frustration if critical data isn't viewable in a useful format, delivered timely, and easy to navigate through. Like today's experience with the bad GPS system, program managers will overshoot turns to great opportunities, be unable to dodge threats and maintain control over the card business. Stayed tuned for part 2 of this post for examples on what makes for good prepaid business intel.
PS- a special thanks to Alex the plastics businessman. Your hospitality was appreciated!
First Bank of Delaware, a provider of prepaid card programs, has announced a new loan product – Simply Credit that will provide a credit line to those individuals who traditionally have had limited or no access to credit.
Consumers need to only fill out a quick two minute application online and notification of approval can be provided in a matter of minutes. Consumers can access their Simply Credit line of credit through their existing prepaid card, providing quick and convenient access from any location 24 hours a day,7 days a week.
Once approved, consumers can access their Simply Credit account athttp://www.simplycredit.net
or by calling a toll free number. Simply Credit allows consumers who normally don’t have access to credit the ability to borrow money to meet short term obligations. In lieu of a periodic rate (0%periodic rate, 0% corresponding APR), consumers are simply charged a transaction fee of $1.20 for every $10 (12%) borrowed, with no late or over-limit fees. Additionally, in order to assist consumers, First Bank of Delaware reports this product to the three major credit bureaus.
“We are very excited to add this product to our current offerings. Holders of prepaid card products, many of whom are underbanked and unbanked, need access to credit to cover short term obligations or cash related emergencies. Our goal is to provide these consumers the credit they need, while putting them on the path to more traditional financial products and services. Through a unique bank-to-bank business environment and innovative technology provided by our strategic services provider Protective Draft Credit, this program is available to other banks who wish to offer a lending feature to their prepaid customers. Our desire is to work in partnership with other issuing banks and their partners to quickly deliver this valuable service to the prepaid market. Through superior technology and support, Simply Credit provides an excellent consumer experience and an immediate opportunity for banks to serve an underserved market” says Alonzo Primus, CEO of First Bank of Delaware.
What's the role of the sales, marketing, and business development professional in today's world? I think about this question a lot and how the mind set of the buying world has changed, yet so many organizations still hold on to older beliefs in terms of how these areas of business should be viewed and executed. Sales, marketing and business development functions can be compared, I think, closely to technology. Both have environments and operating systems. Both have varying methodologies and strategies. Both can certainly be executed poorly or positively. And both can become dated and irrelevant. So when we look out into the published world of the sales, marketing and business development, why is it that we see very little "updating" relative to the changes we seen in the technology space? Even though the social dynamics associated with bringing buyer and seller together can be in many ways far more complex and fluid?
Thoughts:
The next time you're talking zeros and ones, hardware and software, networks and comm, remember that legacy isn't just about technology. Other areas of your company could need an update, reboot or replacement.
I'm sitting at gate C30 waiting to board my flight to Orlando. I wonder how many others on this flight are attending the Expo. Hugh Bursi arrived in Orlando ahead of me. This event is stacked with great workshops and sessions. We'll be meeting with a few strategic partners and clients as well.
I've created a photo album specifically for the event and will be posting them daily.
http://www.prepaidenterprise.com/photos/prepaid_expo_2009/index.html
Alex Shegda has recently been inspired by the crew to start blogging again. His blog titled 'Payment Systems Hardware' covers his insights and real life experiences gained while setting up hardware and network environments for enterprise level payment systems. Enjoy!
In part 1 of this post I discussed some of the interesting points raised by Red Gillen of Celent concerning the card-to-card transfer opportunity many program managers pursue. In this post, I'll share the attributes of a program I personally worked on, with an emphasis on strategies expected to address and/or eliminate many of the social, infrastructure and regulatory challenges faced.
For starters, here is the actual program description submitted to MasterCard for approval (MasterCard issued approval on 05-08-06):
Program Overview
The Allende Coahuila Prepaid MasterCard is a two card set Program designed to provide former residents of Allende Mexico now living in the U.S. a means to transfer money from the U.S. to family and friends in Mexico. The primary card will be a MasterCard branded debit card with the secondary card being a Cirrus/Maestro card for ATM cash access only. Card sets will be mailed directly to verified consumers by a certified MasterCard vendor. As a personal spend card, the primary card in the U.S. can be loaded via Payroll Direct Deposit and any approved retail or RPPS payment center.
Target Audience
The Allende Coahuila Prepaid MasterCard Program will target specifically residents of Allende Mexico and their families living in the U.S. who currently transfer money on a regular basis to family members.
Marketing Methods
Unlike traditional marketing methods associated prepaid card programs, the Allende Coahuila Prepaid MasterCard will take a reversed approach in that we will enlist the secondary card recipient in Mexico to influence the sale of the primary card to a U.S. Resident family member. We have formed a relationship with the city of Allende Coahuila, Mexico to assist with the promotion and marketing coordination designed to identify the consumer currently receiving money transfers.
The City of Allende will initiate various promotional activities designed to generate a response from residents who are currently receive money transfers from family or friends living in the US. In the promotional message the consumer will be instructed to visit the City Hall where city staff members will educate the consumers on the benefits of receiving money transfers via a card based program versus Western Union or Money Gram. We will then encourage the Mexican resident to contact their family member in the U.S. to promote the card and provide MSP contact information for follow up sales.
Marketing tools Include:
Sales, Enrollment and Distribution Process
In part 3 of this post, I'll line up the challenges and results. Stay tuned...
Today I had an interesting call with a potential issuing system customer. The conversation started out as usual and took a strange turn as we discussed the value proposition and the benefits a program manager can experience by bringing the function of prepaid transaction processing in-house. After a few back and forth's on everything ranging from price, experience and background, it became clear to me the issue was that I had started "selling." Rather than asking questions about the company's strategy and being more attentive, I focused more on trying to "persuade" my prospect that we had what he needed. The conversation turned from being about a possible solution to a subtle debate on what makes for a better card business strategy.
Dealing with the ever present desire to persuade others is the internal battle every sales and business development professional faces. I'm grateful I was able to catch myself midstream and take corrective action. The good news is we were able to leave the call on a positive note and moving forward to the next step in the evaluation process.
The reality is that not every prepaid program manager should or could make the transition to Third Party Processor. Today was a good reminder that my job is not convince the world but to find the organizations on the path with or without us.
This week I had a chance to catch up with some reading and picked up the 2008 Fall issue of PayBefore (so I'm a little behind). The article written by Red Gillen of Celent titled 'Remittances May Be Tempting, but Card-Card Not the Way to Go" was insightful and accurate. As a partner/operator of a small TPP in my previous life, we developed and launched what we felt was the answer to many of the barriers described in the article. Some worked some didn't.
Red writes:
To some in the payments industry, a card-to-card model appears to be laden with promise due to its theoretical simplicity: Issue a network branded prepaid card to a cardholder in the sender country, send a secondary card to a cardholder to the receiving country (or have the secondary card sent by the primary cardholder), have the primary cardholder transfer funds via the card program's internal processing and have the secondary cardholder access funds via ATM withdrawals or POS. use.
Complimenting this apparent simplicity is the potential for multiple revenue streams: card activation fees, ATM withdrawal fees and interchange fees. If one makes sure that card-card-transfer fees are just a little more competitive than Western Union's fees, It's jackpot time, right? WRONG.
The key phrase being 'theoretical simplicity'. Everything covered in this article is dead on. Issues ranging from social, regulatory and infrastructure hurdles leave many program managers wondering how a sure fire opportunity fails even with significant investment of time and resources.
In part 2 of this post, I'll go through the program I worked on called the Allende Coahila Prepaid MasterCard. It was a pretty slick partnership between a Northern Mexican town and our issuing bank designed to support card-to-card-transfers in a isolated community. Many of the program attributes were implemented to address the list of issues covered in Red's article.
Stay tuned...
On-Line Strategies news release shows up on Glenbrook Partners' Paymentsnews.com. OLS.Switch proves to be a reliable enterprise level transaction processing engine for both card acquirers and issuers.
Great article featured in the Greensheet.com by Lee Britton covering practical applications of prepaid and mobile payments.
With Christmas day upon us, we can't help but feel warm, fuzzy and compelled to give. The spirit of generosity is as infectious as a yawn and it assures us we're good people. What I find most interesting about the result of being giving in the context of business development and sales is that the principal still holds true - if I'm sincere and giving during the relationship development phase of the process, I can inspire true interaction and do away with "selling." I'm not implying using Love Guru tactics to create a hippy community while losing site of the opportunity. The goal should be to create fertile ground for a real conversation about a problem and solution.
When was the last time you thought about how to increase your potentials customers' sales? Make it a point to listen to your prospect's needs even when they don't apply to what you're proposing. Chances are there's an organization on your prospect list that has exactly what they need [this happens more frequent than not] When it makes sense broker the introduction and your prospect will be grateful. You're grateful for him listening to what you have to say and he is grateful that you called. The perfect environment for any business development effort.
Sincere gestures inspire business development. Merry Christmas.
In a few months, we'll be coming to a town near you. Enterprise level retailers are going to be a bunch of happy campers! Two words - Cost savings.
Ronnie Chesko is a member of my business development team and is an up and comer in the the payments industry. We met through a mutual friend and he ended up doing some work for a client of mine in a previous work life. Now we are stomping the streets and venturing out to make known to all who live, a next generation payment technology called OLS.Switch.
The most interesting part of a normal work day is going through a list of our sales opportunities. The process is very informal but follows a familiar path every time. Ronnie will tell me about companies he has called on and fills me in on the positive and negative responses. First, we do some high fives on the positive responses, then get to work on the negatives. We take a very inward approach to dealing with negative responses because we can only control our actions. This is very helpful when trying to understand how to make our message more palatable. By taking responsibility for the delivery of our message we can ultimately refine how we make connections with people.
Today was a perfect example. After several attempts to establish contact with a Fortune 500 retail chain, Ronnie received an email from the organization's CFO that would have any seasoned salesman running for cover. The interesting thing about the CFO's email is that he states "I usually do not respond to emails like yours..." After looking back at Ronnie's dialogue with this CFO, it becomes clear why he responded. There was an underlying theme of humility throughout Ronnie's messages which somehow made a human connection. In no way does "humility" mean pansy or indirect. Each message was as direct as can be.
This deal is far from dead. In fact, as I write this post Ronnie is heading over to meet me to discuss how we can keep the dialogue going with this potential customer. After all, we are proposing a solution that would save the company hundreds of thousands of dollars per year in payment processing costs.
I believe the days of Jedi mind trick selling are over. Human connection is the catalyst for sales.
On-Line Strategies is profiled in the current issue of The Greensheet. The publication reaches thousands of agents and their ISOs. Hugh Bursi tells the world about our shop's next generation payment technology.
Although I am a transplant from the tiny island of Guam, Thanksgiving is a holiday I enjoy simply because I have much to be thankful for. So do you. Have a wonderful Thanksgiving!
Two general sessions made the entire trip worth while:
Colin Powell on Leadership and Taking charge. What a time to be awake! I left that session ready to take on the world. Check out John Ryan's blog for notes on Mr. Powell's session.
Bill Taylor's discussion with ING Direct CEO Arkadi Kuhlmann. Probably one of the most unconventional banker's on the planet. A rebel with a cause. Key points from Arkadi Kuhlmann:
During the BAI Retail Delivery Conference & Expo I attended a Social Networking session. The speaker suggested we utilize applications such as Twitter to create deeper ties to relevant communities. So I did. I posted my first Tweet the following day and a few hours later John Ryan was already connected to me. A few posts later I was introduced to the John Ryan Blog. Nothing short of amazing. The blog had video interviews and comments on the event already posted while I was enjoying Cuban Coffee in the convention center food court. I think I'm going to like this Social Networking thing.
Hugh Bursi and I attended the BAI Retail Delivery Conference & Expo in Orlando, FL. We sat in some really good sessions and some mind numbing ones. The highlight of the event was listening to Colin Powell and ING Direct CEO Arkadi Kuhlmann. Awesome approach to leadership and strategy. I left pumped. I also had a chance to spend some time with Hugh. We had some great conversations on how to grow the business and I will be learning a lot from him.
Be on the look out for my notes from the event. I'll compile my chicken scratch and post them over the next few days.
Every now and then I come across an article that tells an incomplete story on Prepaid Debit. The article published on CNBC.com titled "The Real Deal Behind Prepaid Cards," is yet another example of the common misunderstanding surrounding prepaid products . The article essentially picks apart the Prepaid Visa RushCard as a sub-standard option for credit challenge consumers.
The article states...
"Take the trendy-looking Prepaid Visa RushCard, the brainchild of hip-hop mogul Russell Simmons. Simmons says the product makes you “financially empowered,” and many Americans have bought in, with 1.5 million RushCards issued in the past five years. But these cards may be more financially draining than empowering – carrying costs and transaction fees that add up fast. So before you rush out to get one, know the price you’ll pay for the prepaid life."
My thoughts...
Prepaid debit products are primarily designed for consumers unable to access mainstream banking services for any number of reasons. Based on normal, every day usage, a cardholder can expect to pay $10-$15 per month in fees. For someone making a transition from cash, it is a small price to pay for the security and convenience associated with holding funds in an account. In contrast, a traditional checking account may not be the best option for a consumer just learning to manage their finances. The cost of checks and overdraft fees will dwarf the cost of a prepaid card. Additional cost benefits include the elimination of money orders and check cashing fees. A service widely used by the unbanked consumer.
The article states...
"Prepaid cards also come with extremely high fees. To get the card in the first place, you have to pay a fee of $19.95 and then for every withdrawal or transaction you make you pay $1 PLUS ATM fees associated with the bank you are withdrawing from."
My thoughts...
Unbanked or underbanked consumers spend far more using other alternative financial products and services such as check cashing, bill pay, money orders and money transfers. Additionally, you don't have to look too far outside of a normal checking account to find "extremely high fees." Consider a $30 dollar overdraft fee on a $10.00 purchase. A few of these and you're beyond extremely high fees and somewhere in the neighborhood of outrageous. Prepaid cards become a good "starter" account for a consumer in training.
The article states...
"Prepaid cards in general are marketed to those of us who still believe that everyone has the right to credit, even if you've already destroyed your own. But having credit is a privilege, not a right – and its a privilege you pay for. In some cases such as these, the price is simply too high."
My thoughts...
Prepaid cards are marketed to individuals who are traditionally unwanted by financial institutions. Or just coming out of financial hard times. Credit building is a nice feature but is probably the last thing on an unbanked consumers mind. They are looking for ways to eliminate the cost and inconvenience of having to run around cashing checks and paying bills. Some are even looking for a little dignity. Having a branded Visa or MasterCard can have a positive affect on self worth in unbanked social groups. Read my previous post for more on this subject.
The article states...
"If you're going to get a card to build credit, start instead with a secured card. A secured card is a credit card with a credit line that is built on your initial deposit – your credit is your cash –and these cards build your credit history. And if simply having the ability to plop down plastic is your goal, you're better off with a debit card."
My thoughts...
Using a prepaid card credit building feature such as the RushCard card's RushPath to Credit makes much more sense for a new or recovering credit consumer because;
At the end of the day, prepaid is not for everyone. Just like BMW's are not for everyone. The slightly negative perception displayed in the article is a result of taking a product designed and package for one demographic and weighing against factors applicable to another. Unbanked and banked consumers have different needs so having access to entry level financial account services is a good thing.
The financial empowerment RushCard refers to is not just about building credit but about leveling the playing field for disenfranchised consumers. In order to play they need a ticket to the game. Prepaid account services get them in the door to mainstream banking (when most banks won't) so one day these same consumers can make the transition to traditional checking accounts, credit cards and eventually home ownership.
I'm not hating on Carmen or CNBC - I'm just dropping some science.
I am payment systems professional currently in the sales and business development trenches of the prepaid space.
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