Is the U.S. Finally Getting Smart About Payment Technology?

Below you will find an infographic from ComputerScienceDegreeHub.com that maps out the evolution of credit cards - from the highly unsecure magnetic stripe cards that are still used by most Americans today, to the EMV smart cards that are more secure and have been successfully implemented in other markets around the globe. When will the US make the switch? Is the cost of the conversion too high? - If so, where do we go from here?

Source: ComputerScienceDegreeHub.com

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Prepaid Debit Cards: Safety & Security in Logistics Warehousing

Guest Post by ODW Logistics 


Third-party logistics providers work to ensure that the supply chain management of prepaid debit cards includes consumer protection. Safety and security are important factors when handling this sensitive product.


 Here are some factors to consider:

• To be a sophisticated provider, the first area of protection starts with the warehouse entrance gate. All visitors and employees are registered to keep potential security threats at bay.

• Other important safety and security precautions to consider in a prepaid products warehouse provider include: automatic police dispatch, alarm fitted fire doors with a safe escape, trip hazard floors, semi annual inspections on equipment to ensure everything is working properly, disaster recovery plans and required certifications.

• Hiring trustworthy employees to join your staff is quite possibly the most important factor.  Your product and customers are not going to be safe if your 3PL does not screen employees and verify they undergo the correct training.  

Each prepaid fulfillment operation will have its own characteristics based on customer demand. When choosing a 3PL or other fulfillment company to manage your prepaid products, some or all of these factors may or may not apply.

_________


Guest post by All Payments Expo exhibitor, ODW Logistics

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5 Reasons to Partner at All Payments Expo

All Payments Expo is less than 3 weeks away, and attendees and speakers are already starting to cement their partnering plans for the event.

Here are 5 Reasons Why You Can't Miss The Partnering Opportunities at All Payments Expo:

1) Market Size: All Payments Expo is home to 1,500+ players looking for partners, including card networks, processors, issuers/acquirers, retail banks, start-ups, new technologies and 300+ merchants. Register now and start messaging them immediately to book onsite meetings. 

2) Interoperability: The future of payments relies on an interoperable infrastructure, which can only be achieved by leveraging partnerships with numerous stakeholders, including incumbents and newcomers fresh out of beta testing.

3) Investment Potential: Venture capitalists, banks and major corporations are all on the hunt for the next investment or acquisition. The potential licensing agreements, investments and acquisitions are why so many investors, banks and start-ups attend All Payments Expo.

4) More Merchants: Retailers will continue to play a hugely important role in emerging payments acceptance. Without a frictionless consumer experience and a strategic loyalty play, many new payments types won't find merchant acceptance -- or get off the ground. This is the only payments event with 300+ merchants in attendance.

5) The Future of FinTech: New non-bank companies are reinventing the ways consumers borrow, buy and bank. These newcomers often compete with hefty industry mainstays and grapple with uncertain regulations. With more than two days devoted to FinTech content, you'll meet new companies looking for scale and established firms looking to innovate quickly.

Register now to make a big impact on your 2014 strategy.

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Network Branded Prepaid Cards: Transcending Traditional Boundaries

Traditionally, prepaid cards were thought to be for unbanked or underbanked people who cannot get a checking account or qualify for a credit card. As payment trends shifted from cash and checks to debit and credit, prepaid cards were a solution that allowed people without bank accounts to purchase online items, pay over the phone, make collect calls and track spending.

Prepaid cards have matured and found their own value proposition in several areas other than just being a replacement for credit cards and checking accounts. They are uniquely fulfilling the needs that were left unaddressed by traditional payment products:

•  Student cards for university funds disbursement
• Rather than waiting for scholarship and loan checks to be cut, mailed and sent, universities can now quickly and efficiently, load funds on student cards that act as both student IDs and prepaid debit cards. Not only is it easier to track allocated funds, inventory, shipping and labor costs of disbursement are dramatically reduced.

• Teen cards controlled by parents
• With a prepaid card issued to teenagers but managed by parents, this mutually beneficial option gives both parties freedom and control respectively. Parents are able to load the card at their discretion and monitor how their child is spending the money. Because funds can be loaded remotely (either online, over the phone, or automatic transfers) there is added convenience and security in case of emergencies. Parents can also restrict the cards to be used only at places they would like their children to go to 

• Commercial prepaid cards for employers/employees 
• Helping small businesses manage business-related payments, commercial prepaid cards, unlike credit cards, are available to both employer and employee. With card management websites, employers can tailor cards to ensure projects stay on budget and control the type of purchases that the employees can make. Employees don’t have to pay upfront or spend company time on expense reports. Commercial prepaid cards work very well for small employers/businesses that cannot get commercial credit cards or those who do not want their credit history be tarnished because of unscrupulous use by a vagrant employee. 

• Travel/Forex cards 
• Travel and Foreign Exchange (Forex) cards reduce your exposure to fraud and does not impact your credit history if lost or misused abroad. With Travel cards, you don’t have to exchange cash or traveler’s checks to foreign currency; saving you time and risk of carrying physical money. Forex prepaid cards can be directly loaded in the currency of your destination country which is not possible with a checking account (debit card) or a credit card. 

• Government fund disbursement 
• Government prepaid fund disbursement significantly reduces costs because it doesn’t require printing, posting or handling of checks. Processed payments are deposited directly onto the Government issued card, reducing clerical error, lost postage and mail fraud. 

• FSA/HSA accounts 
• Flexible Spending and Health Savings accounts can be used to pay for qualified medical expenses at any time without federal tax liability or penalty. Patients can receive needed care without submitting claims or waiting for approval of benefits. Because consumers are more responsible for their own health care choices, it saves them time and insurance companies’ administrative and customer service costs.

• Transit cards 
• Transit cards are much more efficient from the now obsolete token payment process. Not only does the prepaid card heavily reduces cost of minting and storing tokens, it gives passengers options to buy transit packages or pre-purchase rides without having to collect and carry loose tokens. Prepaid transit cards can be easily bought at a kiosk which is not possible for credit cards yet. 

• Payroll cards/Sales commission/Incentive card 
• Prepaid cards for employees are an efficient method for wages, compensation and bonus payments. Employers can easily load Payroll cards for payment of services, travel expenses or commission. Like Government distribution, Payroll cards reduce the cost of cutting checks. It’s also convenient for employees because they have access to their money immediately after deposit. Such cards are very useful for adhoc payments of any kind where the payer does not have payee’s bank account or if the payee does not want to share his bank account information for security reasons.

• Remote check deposit 
• Remote check deposits are beneficial because it allows companies to deposit checks from their computer rather than having to go to the bank. This eliminates travel expense, reduces admin and paperwork, and allows you to consolidate bank relationships, as well as, have speedier access to deposited funds. Looking at the potential of prepaid cards, Visa in 2012 announced a service, Spyke, which allows all Visa prepaid card holders to deposit a check by taking its picture from their smartphone.

The continued expansion of prepaid options has evolved the payment industry by reducing time and cost, while also, increasing convenience and efficiency in unique ways. Prepaid cards are no longer ‘just’ an alternative to credit cards and checking accounts for underbanked and unbanked.

This was a guest blog written by CoreCard Software, Inc.

About CoreCard Software, Inc. 

CoreCard Software, a leading provider of card management systems and processing services, offers an array of account management solutions to support the complex requirements of the evolving global financial services industry. The CoreCard® software solutions provide the market's most feature-rich platform for processing and managing a full range of card products including prepaid/stored-value, fleet, credit, debit, commercial, government, healthcare and private-label cards as well as accounts receivable and loans. Headquartered in Gwinnett Innovation Park in Norcross, GA with additional offices in India and Romania, CoreCard is a subsidiary of Intelligent Systems Corporation [NYSE Amex: INS]. For more information, call 770-564-8000 or visit www.corecard.com.

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Prepaid Expo Day 1: Evening Recap

The Annual Paybefore Awards take time to recognize key players in the prepaid industry who have made significant strides in the space. This year there were many deserving candidates but the list below are the "Best-in-Category" winners. Congratulations to those who won an award. Paybefore Awards: Best in Category Winners Best Network Branded Gift Card Program - Western Union Gift and Greeting Card Most Effective Closed Loop Prepaid Card Program - Do It Yourself Home Improvement Gift Card Best GPR Card Program U.S. - PayPal Prepaid MasterCard Best GPR Card Program International - American Express Global Travel Card Best Third Party Payroll Program - ALINE Card by ADP Best Corporate Payroll Card - Walmart Money Network Payroll Distribution Service Best Prepaid Incentive Reward Rebate or Loyalty Card Program - Vitality Healthy Food Card/Walmart Best Benefits Distribution Card Program - Aetna Flu Care Card Best Business to Business Prepaid Card Program - TPC Payables Prepaid Visa Card Outstanding Mobile Wallet or Mobile App - Moneto Prepaid MasterCard and Mobile App Best Virtual or Digital Program - 10$ Starbucks eGift for 5$ LivingSocial Deal Most Effective Marketing Campaign - Visa National Consumer Campaign 2012 Best Retail Merchandising - Green Dot Retail Marketing Best Prepaid Card or Packaging Design - Simple Visa Best Consumer Value - BlackBoardPay Most Effective Solution - UEPS/EMV Debit SASSA MasterCard Best non-US Based Program - Power to Pay Most Innovative Program - MTA Reload Card Best Retail Based Prepaid Card Program - Walmart Expanding the Boundaries of Prepaid - Discover Outstanding newcomer - Kaiku Visa Prepaid Card Breakout Company of the Year - Rev Worldwide Industry Achievement - Brooks Smith: President and CEO of InComm & Roy Sosa co-founder and CEO Rev Worldwide

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The NFC Solution for the iPhone

The iPhone may not be NFC-enabled, but some payment players are trying to change that. U.S. Bancorp has been testing a touch-to-pay technology for iPhone users. The NFC-enabling technology is built into the smartphone case. This is big news for iPhone users, especially as the iPhone has not yet been equipped with NFC technology.

For iPhone customers, this opens up a new form of tap-and-go payment. Niti Badarinath, U.S. Bank's digital strategy and mobile banking head, said in an interview last year that he views mobile payments as "the next frontier."

NFC has been under fire from several players in the payments ecosystem, includingPayPal. But this latest move shows that there are many industry players who believe in NFC. With the market share for iPhones in the U.S. at 32%, will this NFC-equipped case change the game for NFC proponents?

Join us at the Prepaid Expo in March where industry experts from Giftango, Visa, Blackhawk, Oberthur Technologies and many others will be discussing the future of NFC, mobile wallets and other emerging technologies.




ABOUT THE AUTHOR

Ryan Geswell is a New Media Analyst in the Finance Division at IIR USA with a background in Marketing and Media. He can be reached at rgeswell@iirusa.com.

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Groupon Joins the Crowd in Mobile Payments

Groupon, the popular deal-of-the-day website, recently announced that it will now join the already crowded waters of mobile payments. With the launch of Groupon Payments, merchants are now able to accept credit and debit cards by swiping through a card reader attached to a smart device.



In an almost mirror proposal to its leading competitor, Square, Groupon touts that their service will guarantee the lowest rates possible, or match the lowest available. The new rates systems are structured in three tiers:

 • Swiped transactions — MasterCard, Visa and Discover (1.8 percent plus 15 cents) and American Express (3 percent plus 15 cents)

• Keyed-in transactions — MasterCard, Visa and Discover (2.3 percent plus 15 cents) and American Express (3.5 percent plus 15 cents)

• Non-Groupon merchants can also sign up for the service, however, they will be charged slightly more (2.2 percent plus 15 cents for MasterCard, Visa and Discover) Square offers 2.75% on all transactions or a flat $250 per month fee for businesses that generate less than $250,000 a year in revenue.

The new Groupon Payments Service also introduces a Merchant App. The app allows the merchant to accept daily deals, update business reports in real time, and also to scan and redeem Groupons which could attract those who already participate in offering Groupons to customers. The app will primarily be operated by the merchant until the customer will need to designate a tip and sign a digital receipt with their finger as they would any ordinary credit card device.

After the transaction is complete, the customer will receive an email with an electronic receipt. Payments through Groupon will have a quick turnaround. Merchants will be able to view transactions online immediately, and will be receive cash in their bank accounts from transactions of the day overnight.

 
As far as physical card swipers, Groupon has developed two methods to attach the reader to smart phones; a card reader dongle attachment, and a sturdy phone case. The card reader dongle attachment in appearance is like any of the ubiquitous card readers that are offered by Square and other services. The phone case reader is just that, a phone case that is attached to the smart phone in a sturdy non-intrusive package. The dongle is free when merchants sign up for Groupon Payments, the phone case on the other hand is available for $100.

In an interview with AllThingsD, Mihir Shah, Groupon’s VP of Mobile and Merchant Products, noted that he doesn’t think that Groupon Payments will compete with Square, rather it is targeting existing “Groupon merchants, who are running a brick-and-mortar restaurant business, like a restaurant or spa, and have already been accepting credit cards for a long time, and have high volumes,” he said. “The thing that comes up again and again is credit card processing, and we think they are paying too much.”

Though Groupon (NASDAQ: GRPN) stock price has dipped in recent months they aim to diversify their revenue streams by entering the already crowded waters of alternative mobile payments market. As the mobile payments space grows, services will attempt to one-up each other in order to become more appealing to, the real benefactors of their efforts, merchants and customers.

ABOUT THE AUTHOR

Phil Ng is a Social Media Analyst at IIR USA with a specialized focus on technology and technology culture. He may be reached at PNg@iirusa.com.

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Will credit card trends of 2011 apply to general purpose prepaid cards in 2012?

The year 2011 was nothing less than a roller coaster for the payments industry, which saw a lot of changes and new initiatives. Some notable developments were the Durbin Amendment, creation of CFPB, NFC initiatives from the likes of Google, Visa, Verizon, AT&T and others, a slew of mobile apps for payments and digital wallets, Square’s dongle taking off and several others following suit, an increase in credit card spending and a fall in delinquencies. 

From amongst these developments, MyBankTracker^TM identified five key trends in credit cards. 

Let us look at these trends and see if they will spill over into the world of prepaid cards, which had a growth story of its own in 2011 (Eight Annual Prepaid Forecast Report from Mercator):

Credit Card Trend 5: Mobile Rewards Redemption

As mobile banking applications evolve to offer the same capabilities as the online account interfaces, rewards redemption is making its way to smartphones.

Discover upgraded its mobile apps so that customers can redeem their cash back balance through direct deposit, statement credit, or eCertificates. An eCertificate is an electronic gift code that can instantly be used to make purchases at participating brand partners.

Citibank released an app dedicated to its ThankYou Rewards program which lets customers redeem reward points on-the-go. In collaboration with Best Buy, the app allows users to scan merchandise with their phones to see the cost in terms of points. Purchased items can be picked up at the store or shipped to an address.

Will this trend spill over into prepaid cards?

Historically, prepaid cards have not been associated with rewards and loyalty, let alone rewards redemption through mobile phones. This is because prepaid cards were considered to be for the unbanked and less credit worthy customers. Those who needed them bought them despite heavy fees and the card issuing companies did not feel a need to attract customers with rewards. None of the top five prepaid cards advertised at prepaid101.com have rewards associated with them; only two of top 10 have some kind of rewards. 

But a lot has changed in the last few years: people are avoiding credit to stay credit worthy, debit fees have risen significantly and revenue from debit (interchange) has been capped at about half of what they had been. Traditional credit card issuers such as American Express, Citi Bank and Discover have jumped into prepaid cards to acquire new customers and revenue streams, intensifying the competition in this field and creating a need for some kind of incentive to retain the customer. Also, now prepaid cards are being issued to the non-needy customer (budget planner, traveler, debit fee avoider) who needs a little more than the immediate tangible benefits of the card to be attracted to a prepaid card offer. 

For the prepaid card issuing companies and retailers, getting customer behavior data from rewards and redemption can be very useful in selling them the right kind of products as well.

Rewards redemption through mobile is more effective because many customers have their phone with them always and the devices are location aware, making rewards more targeted and redemption more feasible.

So, yes, we will see rewards being generally offered with prepaid cards and also see mobile apps for rewards redemption.

Credit Card Trend 4: No preset spending limit

The invention of the “no preset spending limit” feature is being highlighted as a so-called “perk” that may actually pose danger to the consumer.

Many cash back/rewards credit cards will offer this feature to customers who have better credit histories. Examples include Bank of America’s BankAmericard Cash Rewards card and Citi’s ThankYou cards.

It lets customers spend past their assigned credit lines without incurring over-the-limit fees. Consumer advocates warn against the allure of “no preset spending limit” due to the increased possibility of overspending.

Will this trend spill over into prepaid cards?

Prepaid cards by definition can spend only the funds that have been added to them. So this trend does not apply to prepaid cards.

Credit Card Trend 3: No Foreign Transaction Fees

The average credit card will charge a 2-3% fee on purchases made outside of the United States. For the frequent international traveler, this foreign transaction fee can represent a significant expense. But, many card issuers are tossing out this fee on certain cards.

In November, Discover stopped charging foreign transaction fees on all of its cards – like Capital One. Citi, American Express, and Chase have eliminated foreign transaction fees on their more prestigious cards.

It wouldn’t be surprising to see less of this fee, especially on cards for frequent international travelers.

Will this trend spill over into prepaid cards?

A per event fee is the main source of revenue from prepaid cards and a foreign transaction is too attractive an event for the card issuers and processors to not charge the fee. So, no, this trend will not carry over to mainstream prepaid cards.

Credit Card Trend 2: EMV

Throughout the year, the five biggest U.S. banks have begun issuing credit cards that carry EMV chip technology. The cards are currently only available to corporate and more affluent customers but the technology will be making its way to every U.S. credit card.

EMV chips are regarded as a more secure way to process transaction data compared to magnetic strips. It has also become the standard in many foreign nations due to rampant card fraud. The U.S. has been considered a laggard in adopting EMV.

In August, Visa announced plans that give merchants an incentive to accept EMV cards by October 2015.

Will this trend spill over into prepaid cards?

The key driver behind EMV is fraud reduction. Prepaid cards are a more likely candidate for misuse and fraud because they are offered to anonymous customers or to identifiable customers without any credit checks. The target customers for prepaid are more likely to use public, unsecure networks and lose their card information to fraudsters, who can use the information to recreate and misuse the card. Or a financial criminal might buy a prepaid card with the intention of committing a fraud. EMV technology makes duplicating cards difficult and also makes offline and card not present transactions more secure. 

In addition, EMV based prepaid cards for use in retail or in transit offer a strong business case for issuers as discussed in an Aconite White Paper.    

For these reasons, main stream general purpose reloadable prepaid cards are likely to adopt EMV technology in the very near future.

Credit Card Trend 1: Mobile Payment Functionality

Taking center stage is mobile payments. Consumers who’ve been quickly adapting to financial management on their mobile devices are eagerly awaiting the day they don’t need to carry a credit card to use it.

Google Wallet launched with Citi MasterCard customers using near-field communications technology for contactless payments.

ISIS, a joint venture by the nation’s largest mobile carriers, has locked in major phone manufacturers and major payment processors that will begin promoting NFC technology on mobile devices in early 2012.

Apple is yet to mention NFC for the iPhone but the technology was on the wish list for consumers who waited to purchase the recently released 4S model.

Will this trend spill over into prepaid cards?

The most notable NFC mobile payment initiative in 2011 was Google Wallet and the cards that currently can be provisioned on the phone are Citi® MasterCard®, the Google Prepaid Card or Store gift cards from participating merchants. It’s not hard to notice that the scale is tilted in favor of prepaid cards already as far as Google Wallet is concerned. The biggest problem (not technology related) is that credit card issuers/banks, network operators and mobile wallet providers are all fighting over who owns the mobile wallet customer and who bags the proceeds from the card use. An unintentional fall-out of this situation will be that mobile wallet providers (Google or ISIS) will issue their own prepaid cards to be provisioned on NFC phones.

So, yes, this trend is very likely to carry over to prepaid; in fact, I believe that prepaid cards will lead this trend. 

About the Author

Manish Gupta is a Marketing Product Manager at 

CoreCard Software Inc. 

CoreCard Software is a leading provider of card management systems for prepaid, revolving credit, complex accounts receivable, payday loans, fleet cards and more. CoreCard provides a feature-rich and flexible platform for all prepaid programs, either as licensed software or processing services (SaaS or PaaS).  For more information visit www.corecard.com or stop by  CoreCard at Prepaid Expo 2012, booth #622. 

   

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Digital Photography, Digital Media, Digital….Wallets?

“According to Urban Wallace Associates, more than 6 million U.S. shoppers bought digital gift cards within the past 6 months — a 150% increase since last measured three years ago.” Cards have proven to be convenient and favorable to most consumers because people like to know exactly what they’re purchasing. The transition from paper to plastic seemed to be almost effortless, and it was only a matter of time before it turned digital. Digital transactions are becoming more and more frequent each day, so much in fact that The Square estimates that it “will reach 1 billion in payment volume within a year.”

Last week, Google announced its latest digital development, Google wallet, which will be out this summer. “The first participating retailers will be Macy's, Subway, Walgreens, Toys "R" Us, Bloomingdale's, Guess, and Noah's Bagels. For the payments service, Google is partnering with Sprint, MasterCard, Citi, and FirstData. Eventually boarding passes, tickets, and more will come to the Google Wallet." Coupons and discounts will be offered, and to pay it’s a simple as waving your phone over a terminal. Androids will be the first phone to have Google wallet and it will be interesting to see how phone companies choose to compete with this latest feature, especially with the announcement of a similar service, Visa’s e-wallet. Visa announced their e-wallet will be out this fall in Canada and the United States. “It'll cover all sorts of payment situations, including e-commerce, mobile commerce, micropayments, social networks, and person-to-person payments.”

You can bet with the release dates of both devices set for summer/fall there is sure to be buzz in the upcoming months. Do these services signal the end of “cards” as we know them? What do you think?

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