Selecting a Secure and Compliant Prepaid Reloadable Card Program
The current changes in consumer spending habits have led to an increase in the popularity of branded prepaid “general purpose” reloadable (GPR) cards. Unlike conventional prepaid cards, prepaid GPR cards allow customers to reload the cards with additional funds and even set up direct deposits to the cards, which make them especially appealing to unbanked and underbanked consumers. Distributors of GPR cards should review program compliance as an integral part of the overall value proposition.
In today’s competitive business environment, merchants and other consumer-facing organizations are looking for ways to provide a value-added prepaid card that results in increased retail use and enhanced customer loyalty. Branded prepaid GPR cards provide consumers with the convenience, flexibility, safety and prestige of a network-branded card (e.g., Visa®, MasterCar®, Discover® Network and others) for making everyday purchases, obtaining cash at ATMs and paying bills. Unlike conventional prepaid cards, prepaid GPR cards allow customers to reload with additional funds—and even set up direct deposits to them. Prepaid GPR cards address a variety of consumers’ needs and they utilize the infrastructure of existing payment networks similar to credit and debit cards. Changes in the economic climate and in consumer spending habits have invigorated the usage of prepaid GPR cards, and according to a 2008 Mercator Report, GPR load amounts will grow by over 50 percent annually through 2011. The rising popularity of GPR cards is making them an increasingly attractive component of retail prepaid product portfolios.
Merchants and other prospective distributors of prepaid GPR cards need to holistically examine each component of a planned GPR program to ensure it will launch and grow successfully. In addition to design, scalability and reliability concerns, questions regarding the program’s compliance should also be asked. Have the various components of the program (e.g., card design and issuance, card loading, transaction processing, cardholder communications and marketing, periodic statements, notice requirements, receipts, disputes, chargebacks) been designed to meet or exceed federal, state and industry requirements? This white paper is intended to facilitate discussions with current or prospective prepaid program managers (the non-bank entities that set up and operate prepaid programs) on fundamental compliance questions related to:
- Data protection
- Regulatory and industry compliance
- Integrated risk and fraud management
- Program design parameters
A competent, experienced prepaid program manager will be able to concisely address such questions and can outline the compliance roles and responsibilities of the key participants in the prepaid value chain (i.e., the financial institution card issuer, the program manager, the processor and the merchant/seller). A keen understanding of compliance requirements in the prepaid market will also allow the parties to quickly address changes to the program to meet market demands and opportunities in a timely manner.