CBPP Webinar April 14 v5 - American Bankers · PDF filereloadable prepaid cards aba.com/Business Solutions |1-800-BANKERS ... – Budgets—Helppps plan where ... CBPP Webinar April

Business SolutionsPrepaid Market Update

April 14, 2011

Panelists for Today’s Call

Bill KrollP id tPresidentBusiness Solutions

Christopher McClintonChristopher McClintonVice PresidentBusiness Solutions

Craig FullerCEOTransCard

Mike BrunnerSenior Vice PresidentTransCard

aba.com/Business Solutions |1-800-BANKERS

TransCard

Agenda

• Introduction of Speakers

• Prepaid Market Outlook

R l ti I ti P id M k t• Regulations Impacting Prepaid Market

• Who Are Prepaid Customers?

• Community Bank Prepaid Program

• Contact Information


Projected Growth in Prepaid

• Prepaid debit and payroll card market expected to grow frommarket expected to grow from $44B in 2009 to $164B by 2014

• Prepaid users expected to increase from 5 2M in 2009 toincrease from 5.2M in 2009 to 12.4M in 2014

• 25% of US households are unbanked or underbankedunbanked or underbanked

• 70% of employers favor sourcing a payroll card program from their bank

Source: Aite Group

bank

• Emerging competition from non-banks


Integrated-payroll Prepaid Market Projections

• Certain prepaid card segments continue to outperform others

• Payroll cards will experience y p28% growth through 2014

• Growth in payroll-integratedGrowth in payroll integrated prepaid debit cards is expected to increase in the next couple of years as part of p y pthe overall growth of reloadable prepaid cards


Source: Aite Group, The Branded Prepaid Market in 2010 and Beyond

Trends in Noncash Payments

• Prepaid cards represent the fastest growing segment of noncash payments

• The number of prepaid cards• The number of prepaid cards increased 21.5% from 2006 to 2009 and the value of prepaid transactions increased 22.9%transactions increased 22.9% over the same period

• The number of General P P id d

Source: The 2010 Federal Reserve Payments Study

Purpose Prepaid card transactions increased at an average annual rate of 64%


Regulatory Changes Impacting Market

• Extensive regulatory restrictions on overdraft programs may alter some checking account business

d lmodels

• Potential interchange fee limits for debit cards under the Durbin Amendment will cause major changes to debit card programs


Bank Obligations

• Risk assessment to identify the

Risk Assessment

bank’s needs and requirements • Proper due diligence to identify

and select a third-party provider

Board Due Diligence

Ongoing Monitoring

• Written contracts that outline duties, obligations, and responsibilities of the parties Board DiligenceMonitoring

involved• Ongoing oversight of the third

parties and third-party activities

Negotiate Contract

• Periodic update to board of directors


Bank Obligations

• Customer Information Program– Account-opening procedures to specify identifying information to be obtained– Reasonable and practicable risk-based procedures for verifying identity– Procedures for complying with record keeping requirements– Procedures for checking against government listsg g g– Procedures for providing adequate customer service– Procedures for covering reliance on a third party– Procedures for whether and when a SAR should be filed– Adequate internal controls to ensure that the bank independently test its complianceAdequate internal controls to ensure that the bank independently test its compliance

• OCC Bulletins– OCC Bulletin 2004-34 – Bank Secrecy Act – OCC bulletin 2001-47 – Risk Management Principles for Third-party Relationships– OCC bulletin 2004-20 – Risk Management of New, Expanded or Modified Products and

Services


Community Bank Prepaid Program

• Brought to you by Business Solutions, TransCard, and MasterCard

• General Purpose Reloadable, Payroll, and Gift cards

• Bank-branded plastics• Retained depositsp• FDIC insurance to cardholders• Interest free deposits


Who Are Prepaid Customers?

• Commercial payroll

• College market

• Millennial generation

P l i i• People using more expensive, non-bank payment options


Prepaid Market Segments

Commercial

• Payroll cards

Customers of non-banks

• Guest workers

Entry level depositors

• Customers

Long-term potential

• Student market• Payroll cards• Paycheck

replacement• Travel &

Entertainment

• Guest workers• Day laborers• Agricultural

• Customers establishing credit worthiness

• Turndowns

• Student market• Mobile market• Travel


Reloadable Prepaid vs. Checking Accounts

Source: Bretton Woods, Inc. March 2011Comparative Analysis of Prepaid Cards in an Environment of Rising Consumer Banking Fees


Program Providers

ABA Member

• Establish ICA and BINs through MasterCard

E t bli h S ttl t

• Contract with ABA Member Banks for Prepaid Processing Services

• Establish ICA and BINs for Business Solutions

Provide Marketing

Bank

• Establish pooled funds account for cardholder transactions and settlement• Establish Settlement

Accounts at SunTrust for MC settlement.

• Sponsor member bank as direct issuer

• Program Set-up with Banks

• Product Set-up

• Provide Customer Service via IVR and Web

• Provide Marketing Materials and Marketing Support

• Settle with merchants based on cardholder t ti

• Develop Program Parameters and requirements

D i k iIVR and Web

• Manage Settlement on behalf of Business Solutions and MasterCard through SunTrust accounts

transactions

• Assist with Project Management and Program Launch

• Determine custom marketing material or use establish turnkey materials

• Market and Sell Card to Consumers and Corporate• Coordinate Card production and

fulfillment

• Provide Reporting

• Manage Program Approval

Consumers and Corporate Customer


TransCard Program Management

• TransCard provides:– Plastics production and

fulfillment– In-bank setup and training

Operations Risk & Compliance

– 24/7 customer support– Fraud prevention and

oversight TransCard

– CARD Act compliant program for gift card issuance

– Card personalization, embossing

Marketing Fulfillment

embossing– Expedited card replacement


MasterCard Brand Strength

• Free bank-branded marketing materials

• BIN sponsorship• Settlement with merchants• Accepted anywhere

MasterCard debit may be used


Supplied Marketing Materials

Cash Envelope

Poster

Teller Button


Product Mix

P d t M k t B k B fit C t B fitProduct Market Bank Benefits Customer Benefits

General Purpose Reloadable

College market

Millennials

Turn key solution

Deposits remain in bank

Cheaper than other payment options

ReloadableUnderbanked

Unbanked

No overdraft risk

Compliant with banking laws

FDIC Insured

No overdraft fees

Funds immediatelyFunds immediately available from cash deposits

Payroll Commercial Expands product offerings Reduce check handling costs

Gift Card Incentive Fulfills seasonal needs One-stop shopping


Payroll Card

• Employer preference for prepaid debit d h k ( t ilcards over paychecks (retail,

restaurant, manufacturing, construction, etc.)

• Provides cost savings and benefits to• Provides cost savings and benefits to employers and employees

• Participating employees do not need a banking relationship to get startedbanking relationship to get started

• Qualitative benefits to employee include greater convenience, security, and control

• Prepaid program offers banks opportunity to expand commercial business and deepen relationship with


existing corporate customers

General Purpose Reloadable Card

• Deposit product for underbankedand college students

• Entry-level deposit product for y p pcustomers

• Excellent alternative to traditionalExcellent alternative to traditional checking accounts

• Consumer demand is high• Consumer demand is high, and has been recognized by non-bank players


Gift Card

• Open-loop prepaid gift cards redeemable anywhere MasterCard debit is accepted

• Bank may target peak gift card seasons (Mother’s Day, Dad’s & Grads, Christmas, etc.)


Cardholder Benefits


Virtual Terminal

• No integration with core system required

• Secure web-based administrative portal allows bank personnel to:– Issue/Activate Cards– Register Cards– Load/Reload Cards– Balance Inquiryq y– View Reports


Mobile Access

• Cardholders can register any cell phone to interact with their cards

• Cardholders can use their phones to:

– Transfer funds– View transaction history– Locate ATMs

Fi d h f ATM– Find surcharge-free ATMs– Pay bills

• Cardholders can customize the following alerts:following alerts:

– Daily, weekly and monthly balances– Transaction alerts at customizable

amounts


– Low-balance warnings

Personal Financial Management

• Cardholders have a free, built-in way to manage their finances– Budgets—Helps plan where g p p

to spend and save money

– Money management—Provides easy-to-read information about cardholders’spending habits

– Text alerts—Alerts cardholders when they spend too much, use money outside of their planned budget or shop at a specific store


shop at a specific store

Bill Payment

• Schedule automatic payments and/or periodic payments

M k t• Make person to person payments to other cardholders

• Use pre-approved payees, or issue paper check payments to those vendors who do not accept electronic payments


24/7/365 Customer Service

• English and Spanish customer service, VRU d bVRU and web access

• All customer service is located in Ch tt TN i t dChattanooga, TN; none is outsourced

• Interactive voice response customization can be built around clients’ needscan be built around clients needs

• Web programs are built in .net with full functionality via the web; additional platformfunctionality via the web; additional platform functions can be added

• Linked to bank website


Linked to bank website

Why the Community Bank Prepaid Program?

Community Bank Prepaid Program

Agent Program Direct BINp g g

Keep deposits

Set pricing

B k b d d C dBank-branded Card

U.S. based 24/7 bilingual customer serviceC t ff ti fCost effective for community banks

Free, customized collateral

Community Bank Prepaid Program gives you the features of a di t BIN ith th f t

ABA discounted pricing


direct BIN process with the ease of an agent program

Contact for more information

Christopher McClintonVice President, Business Solutions202-663-5088cmcclinton@aba [email protected]

David RidleyS i M B i S l tiSenior Manager, Business [email protected]


Documents

CBPP Webinar April 14 v5 - American Bankers · PDF filereloadable prepaid cards aba.com/Business Solutions |1-800-BANKERS ... – Budgets—Helppps plan where ... CBPP Webinar April