prepaid processing javelin 11-5-08

8/3/2019 Prepaid Processing Javelin 11-5-08

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2008 Javelin Strategy & Research All Rights Reserved

Choosing a Prepaid Processor in anEvolving Market:A Study on Issuer and Program Manager Needs

Conducted byJavelin Strategy & ResearchNovember 2008


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ChoosingaPrepaidProcessorinanEvolvingMarket:AStudyonIssuerandProgramManagerNeedsNovember2008 2

Overview................................................................................................................................................3

ExecutiveSummary................................................................................................................................4

WhatWillCharacterizetheEvolutionofPrepaid?.................................................................................6

TheComponentsofaPrepaidProcessingProgram...............................................................................9

DispellingMythsAboutPrepaidProcessors........................................................................................14

SummaryandWrapupKeyConsiderationsforaPrepaidProcessingRelationship..........................22

TableofContents

Asaleadingindependentproviderofquantitativeandqualitativeresearchfocusedexclusivelyonfinancial

servicestopics,Javelinusesrigorousstatisticalmethodologiestoconductindepthprimaryresearchstudiesthat

pinpointdynamicrisksandopportunities.


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Overview

Prepaidcardissuancehasundergoneanexplosioninrecentyears,andallindicationsarethatthistrend

willcontinue.Prepaidissuerswhethernewtothemarketplaceorexperiencinggrowthbeyondthe

capacityoftheircurrentprocessormustcarefullyconsidertheroleandthecapabilitiesofthat

processortorealizethefullpotentialoftheirprepaidprogram.

Theprocessordecisionisintegraltothesuccessoftheprepaidprogram.Currentlymanyofthe

questionsthatissuersshouldproactivelyposegounasked,leavingtheissuerinanuntenablesituation

withinmonthsofimplementation.Prepaidissuersneedtoclarifyallthequestionsthattheyshouldask

priortochoosingaprocessor,andmustperformacomplete,proactiveneedsanalysisforprepaid

processingservices.

Manyissuershavemademistakesintheirearlyiterationsofprepaidprograms,selectingprocessorsthat

woefullyneglectoneaspectoranotheroftheoverallprepaidarena.Thiscaninclude,butisnotlimited

tothefollowing:

Processorswhosefocusononeproductleavesissuersunableexpand.

Processorswho

under

deliver

on

promises

of

scalability

and

reliability,

leaving

issuers

unable

to

growtheprogramtothefullestpotential,or

Processorswhocannotassistprogrammanagersonaconsultativelevel,leavingallofthe

innovationanddevelopmenttotheprogrammanagerthemselves,andthusprovingunableto

fullycapitalizeontrendsintheprepaidmarketplace.

Eachoftheaboveissuescanleaveaprepaidprograminlimbo,withthepainofmigratingoffa

processingplatformworsethanthestatusquo,regardlessofhowunacceptabletheprocessingprovider

andplatformmaybe.Theintentofthispaperistohelp

issuersavoidthatpainandassistprepaidprogrammanagers

ingainingadeeperlevelofunderstandingofwhattheymust

seekfromtheirprepaidprocessor.


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ExecutiveSummary

Companiesmakingimportantbusinessdecisionstoenterand/orexpandtheirprepaidcardpresence

mustbepreparedtomakecriticalprocessingandoperationaldecisions. Thispaperwillhelpyouaskthe

toughquestionstogetthemostoutofrelationshipsyouhavewithprocessorsandensurefull

optimizationfromanyprepaidprogramyoulaunch,manageandgrow.Whetheryouhavean

establishedprepaidissuanceprogram,arelookingtoexpandorpotentiallymigratetoanewplatform,

orareinthebeginningstagesofdecisionmakingregardingaprepaidplatform,thisinformationcan

serveasfurtherguidance.

Companieslookingtoentertheprepaidarenaneedtolookattheholisticcapabilitiesofprocessing

solutions,understandingthevariouscomponentsofaneffectiveprepaidprogramoperationandhow

each componentisimplementedandmanaged.Thefirstsectionofthispaperisintendedtoprovidean

overviewofeachcomponent,andanunderstandingofhowcomponentsfitintothelargerpicturefor

prepaidprocessingplatformchoices.

Establishingarelationshipwithaprocessoranddeterminingwhethertooutsourceallorsomeprogram

operationscomponentsisadecisionwithmultiplecriteria.Issuersandprogrammanagersthosewho

issuecardsdirectlyorindirectlythrougha3rd

partyshouldconsiderthefollowingitemsasparamount

fortheviabilityofasolidoperation:

Productbreadthandevolutioncapabilities:Cantheprepaidprocessorhelpexpandbeyonda

singleproductoffering,providingthesupportandfunctionalityneededforawiderarrayof

prepaidproducts?

Componentsorclientdefinedattributesoftheprogram:Istheprocessorprovidingapoint

solutionoraholisticprocessingplatform?

Processingenginereliability:Willthesystemworkwhenneeded?

Scalabilityoftheprocessingsystemcantheprocessorgrowastransactionvolumeand

correspondingsupport

services

needs

grow?


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ExecutiveSummary

Theexperienceoftheprocessorisakeyfactorinthisequation.Prepaidissuersandprogrammanagers

mustdeterminethelevelofexperiencethattheprocessormayhavenotonlyintransactionprocessing

itself,butalsoinmanagingeverythingfromtechnologytoexceptionmanagement,tocompliance,risk

andfraudmanagement.Whatarethefactorsthatmaketheprocessorsuperior,orinferiorinthese

facets?

Andfinally,therelationshipmanagementcomponentsoftheprepaidprocessingchoicecannotbe

overlookedordeemphasized.Theprepaidprocessoristheconduitfortheissuerorprogrammanager

tothetrendsandevolutionoftheprepaidarena.Successorattheveryleastthedegreeofsuccess

realizedbyanissuercanbelargelydependentontheprepaidprocessorsabilitytorecognizetrends

andworkwiththeissuertoexpandandmanagetheprogram.

Issuersandprogrammanagersmustthereforeanalyzetheclientserviceandconsultativecapabilitiesof

theprepaidprocessor.Howwelldoestheprocessorunderstandthemarket?Thetrends?Clientneeds?

Howwellcantheprepaidprocessorenableitsclientstocapitalizeonthesetrendsandtrulydrivegrowth

throughtheprepaidplatformandproductset?


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WhatWillCharacterizetheEvolutionof

Prepaid?

Asconsumerneedsevolveandtechnologydrivesinnovationintheprepaidsegment,processorsmustbe

flexibleandinnovativeenoughtofullyrespond,butpreferablydriveproductdesign,implementation

andperformancefortheirprepaidissuerclients.InthefuturePrepaidwillcontinuetorequireproduct

diversityandflexibility,buttherapidchangealsorequiresabusinesspartnerwithknowhow,proven

experience,understandingofthemarketplace,andaflexible platformwithcommonvalueaddedtools,

suchasfraudprotectionandinformationmanagementsolutions.Thiswillallowforefficient

managementofprogramsthatgrowasclientneedsgrow.Providersofpointsolutionsthatfocusonone

particularproductormarketarenotwellpositionedtoevolveasprepaidevolves.Issuersmustremain

vigilantastothecapabilitiesoftheirprocessorstoconsistentlyandcontinuouslymeettheirneeds.They

mustcontinuetoquestion,informandinsomecasesdrivetheirprocessingpartnertonewlevelsin

processingandinnovationthatleadstoflexibilityandoperationalefficiency.

Inadditiontotheproductcapabilitiesandbreadth,thereisasecondlevelofcomplexitythatprocessors

musttakeintoaccount.Theprocessorstrulycapableofcapitalizingontheevolutionofprepaidwill

providetheirissuingclientswithflexibleauthorizationparameters,feeoptionsanddecisions,fraud

parameters,load

options,

purchase

options

(web,

retail,

in

branch),

activation

approaches,

etc.,

all

respondingtotheuniqueneedsofamyriadofopportunities.

ThePrepaidCardandtheIndividualRelationship

Prepaidproductsmovingforwardcouldwellformthebasisfordeeperrelationshipswithindividual

cardholdersmorecloselymirroringthedebitcardorcreditcardrelationshipofthepresent.The

evolutionwillbecenteredonindividualrelationshipsbetweenissuersandcardholders,withgreater

longevityfortherelationshipderivedfromtheproductandprogram.Asmoreconsumersutilizeoneof

various

prepaid

products

as

their

primary

payment

mechanism,

they

will

place

a

greater

importance

on

therelationshipwiththeissuerofthatprepaidproduct.Themarketwillbecomelessfragmentedand

separatedbytypeofprepaidproduct.Conversely,therelationshipwiththeindividualcardholdermaybe

lessfocusedontheproductassemidisposablepayrollcardslinkedtooneemployer,orgiftcards


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linkedtoonemerchant,forexampleandmorefocusedonthelongertermpossibilitiesofa

relationshipbetweenissuerandcustomer,turningtheprepaidrelationshipintoastrongerandmore

lucrativebondbetweenindividualandissuer.

Historically,prepaidcardproductshavebeeninstitutionallydriven,withthefocusontheissuing

entityastorebrandedgiftcard,oracompanypayrollcard,forexample.Asmoreconsumersbecome

reliantontheprepaidproductastheirprimarypaymentvehicle,however,theopportunityforfinancial

institutionsandotherprepaidcardissuerstoestablishmoredeepseated,individualrelationshipswith

prepaidcardholderswillexpandconsiderably,forbothretailtransactionsandbillpaymentactivity.

Issuerscanthereforetakeadvantageofthisbehaviorevolutionandopportunity,whichwillresultina

tremendousincreaseintheaveragelifetimevalueoftherelationshipwithaprepaidaccountholder,

regardlessofproducttype.

Thepayrollcarddeepensbothcommercialandconsumerrelationships,andisattheheartofthe

evolutionstrategyformanyfinancialinstitutionsandotherplayers.Thismindsetpresentlymost

readilyapparentinthepayrollcardproductcouldalsopervadetogeneralpurposereloadablecards,

particularlyamongcertainsubsectionsoftheconsumerpopulationthatshowahigherpropensitytouse

prepaidproducts,includingyoungerconsumers,aswellasunderbankedandunbankedconsumers.

Severallargeinstitutionsandotherplayersintheprepaidspace,forexample,arefocusingonthepayroll

cardasaprimaryvehicleforthisevolution.

Thecombinationofbolsteringcommercialrelationshipsthroughthisoffering,aswellastheextended

outreachtoindividualcardholdersforsomepotentiallytheonlybrandedpaymentcardthey

possessmaybethoughtofasanevolutionarystageinprepaidcardevolution.


Prepaid?


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Prepaid?

Companieslookingtoentertheprepaidarenaneedtolookattheholisticcapabilitiesofprocessingsolutions,understandingthevariouscomponentsofaneffective

prepaidprogramoperationandhoweach componentisimplementedandmanaged.


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TheComponentsofaPrepaidProcessing

Program

ManagingtheCard

CardIssuance/Creation:The

platformmustprovidethe

capabilitytoissuetheplastic(or

otherformfactor)cardtothe

specificationsandtheparameters

oftheproductsetandspecific

needsofeachissuer.

CardEnrollmentOptions:Various

products(giftcard,spending,

payroll,etc.)havedifferingneeds

forenrollmentandmanagement.

Theprocessormustbeableto

managethesedifferencesina

seamlessandcomprehensivemannerfortheissuerandprogrammanager.

InitialCardLoad:thenatureofprepaidproductsmakesthisfunctioncritical.Gettingfundson

thecardregardlessofproducttypeisthebasisofusage.Processingplatformsmust provide

multipleoptionsandembracevariousloadstrategiesmakingitsimpleandefficientforend

userstoloadthecard.Availyourselftoasmanyloadoptionsaspossible,including,butnot

limitedtothefollowing:

Aloadnetworkatthepointofsale(suchasVisaReadylink;Greendot,orothers)

ViaACH

Corporateloads(accounttransferw/inoneFIgenerallyspecifictopayrolland

incentivecards,butpotentiallyforotherproductsandapplications)

Fundingfromanothercard

Online

Viamobiledevice

Via

various

ATM

networks

Thereisalargedisparityamongprocessorsinthenumberandtypeofloadnetworkstheysupport,

whichwillalsogreatlyaffectevolutiontovariouscapabilitiesandproducts.Thiswillbeparamountinthe

coming5yearsasproductsandneedsexpand.Prepaidissuersmustthoroughlyexploretheneedsfor

cardloadsandunderstandtheassociatedcapabilitiesoftheirprocessors.


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Program

CardReload

POS

ATM

Evolving

Other

CardReissuance:Whataretheprocessesinplacetoimmediatelydeliverreissuedcards,

andhowdoestheprocessorhandleinventorymanagementofreplacementcards?

Whetherthisisaninhouseactivitythattheprocessorperforms,ordonethrough

establishedpartnerships,theprepaidissuermustensurethatthecardreplacement

processisseamlessandwithoutproblemtotheenduser.Thiswillbeofrisingimportance

shouldtheprepaidcardbecometheprimaryandinmanycasestheonlypayment

mechanismthatenduserscarry.Replacementisahighprofilesegmentofaprepaid

programthatcanreadilyexposefaultsintheissuerprogramandbethecatalystforlost

customersiftherearehiccupsintheprocess.

ManagingtheCardholder

CardholderCare(CallCenter

Services):Many

issuers

rely

on

theirprocessortoprovide

variouslevelsofcardholdercare,

operatingnotonlycallcenters,

butalsoprovidingthecapability

foronlineenduseraccount

management.Thisisparticularly

importantforissuersofprepaid

payrollcards,butextendsto

otherproducts,particularly

reloadable

spending

cards,

but

alsowithstandardgiftcards.

Issuersmustfullyanalyzethese

capabilitieswitheachprocessor,matchingthemtotheirperceivedneedsandtothoseof

endusers.

StatementGeneration,BalanceInquiryCapabilities,(online,viaATM,IVR,andpotentially

viaSMS):Withtheevolutionofreloadableprepaidproducts,itisincreasinglyimportant


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Program

thatendusershaveconstantaccountmanagementaccess,andthatthisiscongruentwith

technologyevolutionforotherpaymentproducts.Istheprocessorprovidingforaccount

accessviathemobilechannel,forexample,or

AuthorizationRoutingandManagement:Doestheprocessorhaveexperiencemanaging

theauthorizationofprepaidcardtransactionsandthespecificsassociatedwiththevarious

prepaidproducts?Cantheprocessorleveragepaymentexperiencebeyondprepaid

productstoprovidefullcoverageforauthorizationandtransactionrouting?

FraudMitigationMonitoring,IdentificationandManagement:Whataretheprogramsthat

theprocessorhasinplacetomitigatefraud?Doestheprocessorhaveexperienceitcan

leveragefromitsprepaidorotherlinesofbusinessthatgiveitarealadvantagein

understandingfraudandassistingprepaidissuerswhollyandcompletelytodealwithfraud

issues?

ComplianceKnowYourCustomer(KYC),AntiMoneyLaundering(AML),otherissues:This

islikelytobecomemoreandmoreimportant,asregulatoryagenciesandlawenforcement

organizationsappeartobefocusingonprepaidproductsasamajorsourceoffraudand

moneylaundering.Theprepaidissuershouldbeheldtohigherscrutinybecauseofthis.

Howisyourprocessorthereforeequippedtoproactivelyandreactivelyaddressthese

concernsandprovidethepeaceofmindwhenissuesarise?

ExecuteTransaction

CardUsage:Theprocessormustbe

abletohandlethevariousnuancesof

prepaidretailtransactions,including

standardtransactions,splittender

transactions(usingtheprepaid

productforpartofthetransaction

andanotherpaymentmechanismfor

the

remainder),

as

well

as

various

authorizationstrategiesassociated

withthesenuancedtransactions.This

againisoftenrelatedtothe

correlatingexperiencethattheprocessorhasandtheknowledgeofpaymentsitcanuseto

drivethesespecifictransactiontypesforvariousproducts.Theprocessormustalsobeable

todrivenonretailcardusage,suchasATMaccessormoneytransfertransactions.This


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Program

includes,butisnotlimitedtotheexpansionofthesetransactionsthroughnewemerging

noncardmechanismssuchasmobilehandsets.

ExceptionTransactions:Doestheprocessorhavedeepseatedknowledgeand

understandingoftheintricaciesinvolvedinrecognizing,processingandservicingexception

transactions?Cantheprocessoreffectivelymanagechargebacktransactions,dealwith

negativebalancesonthecard,andmakethesecapabilitiesasinvisibleandsmoothas

possiblefortheissuer?

PlatformManagementandGrowth

Potential

ValueAddedServices:itisimportantto

knowtowhatextenttheprocessor

supportsadditionaltransactiontypes

andservicesofferedtoendusers,

includingbillpay,moneytransfer,

amongothermechanismsthatwillgain

prominenceasprepaidusagebecomes

moreprimaryamongagreaternumber

ofconsumers.

CardMarketing:Howcapableisthe

processorinworkingwithissuerstomarketthecardproducts?Howinnovativeand

consultativecantheprocessorbeinpromotingtheprepaidproductsandtheirusage?Can

theprocessordeliverthemarketingsupportcommensuratewitheachissuersneeds?

Reporting:Processorsmusthavetheintegratedcapabilitytodelivereffectiveprogramand

individualaccountreportingtomeettheneedsofissuerswithregardstoportfolioanalysis,

aswellasindividualaccountanalysis.Withmanyissuersseekingtoleveragetheprepaid

productasacatalysttodeeperproductrelationshipswithendusers,reportingbecomesan

effectivetoolinanalyzingindividualcardholderreadinessforthoseadditionalproducts.

Issuersmustfullyanalyzethereportingcapabilitiesofferedbytheirprocessorasitrelates

totheirneeds.

ConsultativeRelationship:Istheprocessorreactivelyprovidingwhatissuerclientsrequest,

orknowledgeableenoughabouttheevolutionoftheprepaidmarkettoproactivelyassist

theissuerindefiningthoseneeds?Cantheprocessormovefromtheneedsdefinitionto

implementation,andthentheevolvingneedsdefinitionstageoncetheplatformisupand

running.Theprepaidprocessorsthatstandheadandshouldersabovethemyriadarethose


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Program

thatprovidemorethanjustthenutsandboltsprocessingsolution.Thosethatcanwork

withclientsandactuallyhelpgrowclientsprepaidprogramsthroughaconsultative

relationshipareprocessorsthatdemonstratethemostvalueoverthelifeofaprocessing

relationship.

TechnologyExpansion(contactless,mobile,etc.):Istheprocessorpoisedtoprovideinroads

toevolutionarytechnologyintheprepaidspace?Handinhandwiththeconsultative

relationshipistheabilityoftheprocessortoseamlesslyandconsistentlyprovideissuers

withthelatesttechnologyadvancements, suchasaccountaccessthroughmobiledevices,

thepotentialforcontactlesstechnologyinstandardcardformfactor,withinthemobile

device,orelsewhere.Theprocessoristheprimaryconduitfortheissuerintheawareness

andimplementationofthelatesttechnologyinprepaid.Issuersneedtohavetheimplicit

trustintheirprocessortobeonthecuttingedgewithtechnologyadvancesandtoassist

theminapplyingtechnologytomeettheevolvingneedsoftheirendusercustomers.

ProductBreadth:Theprocessormustbeabletomeettheproductneedsoftheissuer,

servicingtheuniquecharacteristicsofthebaseofprepaidproducts,whichmayinclude:

Consumerself(travelcard)

Consumerother(giftcard)

Employer(payroll,incentive,spending,fleet,pettycash)

EmployeeBenefits

Government

Teenspendingcard

Reloadablespending(generalpurposereloadable)

MerchantspecificIncentive/Rebate

Healthcare

NoProcessorcanmeeteveryneed,butitisimportanttofindarelationshipthatmost

closelymatchesyourproductevolutionstrategy,andaddressesallfunctionality.Issuers

withahealthcarefocusmayneedtoseekoutarelationshipspecifictothatproductset,

potentially

separate

from

the

primary

processing

relationship.

SupportforEstablishedRelationships:Cantheprocessorleverageandsupportpreexisting

acquirerrelationships?Iftheissuerneedstobuildgatewaystovariousacquirers,canthe

processoraccomplishthis?Arethosegatewaysestablishedorwouldtheybespecial

orderandpotentiallydelayedbythecertificationprocess?Shouldthisprovetobean

imperativefortheissuer,thesequestionsmustbeposedtodeterminetheviabilityand

compatibilityoftheprocessorwiththeissuerneeds.


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PrepaidEvolution:ScalabilityinTransactionVolumeandProductBreadth

Myth:TransactionVolumeScalabilityisEasyas123

Prepaidissuerscertainlylookattransaction

volumegrowthasoneprimarymeasureof

success.Butwithgrowthcomesthereality

thatprocessorsmayhavetostruggletoscale

tomeet

the

ongoing

needs

of

their

issuer

clients,particularlyatpeakvolumeperiods.

Theincreasedimportanceofawidervariety

ofprepaidproductsleadstomoreindepth

needsfromthe operatingplatformand

processor.Speedtomarket(i.e.getmeup

andrunningyesterday!),whileimportant,

cannotbethedrivingfactorinselectinga

prepaidprocessingprovider.Reliability,

scalability,hardenedsecurity&compliance

standards,productevolutioncapabilities,and

increasedportabilityforendusersare

primaryfactorsthatprepaidissuersmust

consider.

Surprisingly,thesecapabilitiesarenotreadilyapparentamongallplatformproviders.Duediligence

surroundingtheprocessingcapabilitiesandplatformuptime,forexample,isamustforallcompanies

consideringamajor

investment

in

aprepaid

platform.

Fundamentals

count

Those

lured

by

the

bells

andwhistlesofapointsolutionoraquickinstallationwilllikelyfallshortintheabilitytofosterlong

termgrowth.Additionally,longevityandexperiencecount.Processorswithlargescaletransaction

processingexperience(debitandcredit)havelearnedthroughdoinghowtoeffectivelyandefficiently

provideprepaidprocessingservices.Manyissuersandprogrammanagershavereachedlevelsofsuccess

withtheirbusinessthatismakingthemtakeasecondlookattheirprocessorscapabilities.Successand

growthinprepaidrequiresmanyofthesenewquestionstobeaddressed.

DispellingMythsAboutPrepaidProcessors

Baselinefunctionalitymayinclude,butisnotlimitedtothefollowing:Cardmanagement,cardholdercare,robust

transactionprocessing,andtacticalconsulting.Additionalfeaturesexpandasprogramneedsexpand.Thesegenerallyincludeamorestrategicconsultativerelationship,andadeeperunderstandingofthecomplexitiesfacingeach

individualprepaidprogram.


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ReliabilityandScalabilityinTransactionVolume

Myth:AllProcessorsExperienceLittletonoDowntime

Formanyprepaidcardissuers,thepointofsale(orpurchase)isoftentheprimaryandcertainlyrecurring

opportunitytheyhavetoprovetheintegrityoftheirproductandvalueoftheirbrand toformand

maintainatrustedrelationshipwithcardholders. Thisistrueforbothpurchasetransactionsandfurther

emphasizedforreloadcapabilities.Customersneedpurchaseandloadcapabilityatalltimes.For

reloadablespending

cards,

and

even

for

gift

cards,

the

reputation

of

the

issuing

institution

is

at

stake

witheachtransaction.Ifitdoesntwork,customerswalk.Andtherealityisthatnotallprepaidprocessor

orplatformscanprovidethelevelofreliabilitythatissuersneed.Atthemostbasiclevel,theprepaid

processingplatformmusthaveaproventrackrecordofreliability.Cantheplatformbeupandrunning

atalltimeswhenneededwhetherthatbepre,during,orpostpurchase?

Handinhandwithreliabilityisscalability.Prepaidcardissuersmustalsoassessthecapabilitiesofthe

platformtogrowastheirneedsgrow,firstandforemostintermsoftransactionvolume.Istheplatform

robustenoughtohandleexpandingtransactionvolume?Pointsolutionsmayservewellinthepresent,

butas

the

prepaid

issuance

program

expands,

can

the

processing

platform

expand

to

meet

volume

needs?Includedinthisarealsothevariousfunctions,suchasinventorycontrol,fraudmitigation,

reporting,andtransactionsettlementaretheyallcontainedwithintheoneplatform,ordoesthe

issuerneedtocobbletogetherpiecesofthisfromvariousplayers?

Theseissuesextendfurthertothespecificprogramelementsthataffecttheissuercustomer

relationshipmostpredominantly,includingauthorizationperformance,callcenterandVRUcapabilities,

fraudmitigation,onlineaccountaccessandusage,amongothercapabilities.Howarethosecapabilities

measured,andwhatistheperformancerecordovertime?Moreimportantly,howdoestheprocessor

trackperformanceandworktowarditscontinualimprovement?Prepaidissuersmusthavethese

questionsansweredandnotassumetheyareinherenttoallprepaidprocessingplatformsandservice

providers.



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CustomizationandProductEvolutionCapabilities

Myth:OneSizeFitsAll IssuersSeekStaticProcessingSolutions.

Prepaidmeansdifferentthingstodifferentplayersandissuerneedsareeverevolving.Therealityisall

processorsfacethechallengeofmeetingthediverseandexpandingneedsofprepaidmarketplace.The

lineofquestionsincludesthefollowing:

Doesprocessorhaveademonstratedrecordofcontinualinvestment?

Dotheyhavelongtermproductroadmapandwhatistheirtrackrecordindeliveringontime

againstit?

Havetheydemonstratedtheymeettheircommitments?

Dotheyconsultwiththeircustomers?

Doesthisconsultationhappeninaoneononeenvironmentorbyfacilitatingjointcustomer

workinggroups?

Manyprepaidprocessorsareillequippedtohandlethedynamicnatureofthoseneeds.Asindicated

previously,theprepaidmarketmovingforwardwillencompassawidervarietyofproducts.Different

issuerswill

see

value

in

different

products,

and

opportunities

will

arise

for

individual

issuers

to

expand

to

additionalproducts.Infact,prepaidcardissuersarealreadytakingadvantageofexpertisetheyhave

gainedwithoneproducttoseamlesslyextendtheirlinesofbusiness.Theprocessormustserveasa

conduittothatproductexpansion,andmusthaveexpertiseinthevarioussuccessfactorsandneeds

associatedwithdisparateproductsets.Forexample,giftcardprograms,reloadablespendingcards,and

payrollcardprogramshavedifferentendusers,reportingneeds,paymentnetworkaccessneeds,among

otherdifferences.Doestheprepaidprocessorhaveexpertisewitheachoftheseproductstoprovidefor

thisseamlessexpansion?Cantheprocessorworkwiththeissuertostrategicallyandeffectivelydevelop

theseproductlines?

Prepaidissuersmusthaveanunderstandingofwhethertheprocessorcanmeetalloftheseneeds

movingforward.Thiscanbequitedifficult,ofcourse,asthoseforwardneedsmaynotbeclearlydefined

fromtheoutsetofenteringtheprepaidspace.Itisforthisreasonthatissuersmustbemore

comprehensiveintheiranalysisandvettingofprocessorcapabilitiesthinkingmoreholisticallyabout

whattheymayneedandwhethertheprocessorcanprovideit.



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Security,RiskManagementandCompliancearenotGivens,andIssuersareMore

HighlyScrutinized

Myth:AllProcessorsProvideEffectiveRiskMitigationandCompliance

Securityandriskmanagementareparamountinprepaidcardissuancebothwithrespecttofraud

mitigationandalsointhescrutinythatissuersfacetocomplywithmoneylaunderingandhomeland

securitystandards.Prepaidcardissuersmaybeincreasinglyheldaccountablefortheactionsofnotonly

theirimmediateconstituentsandcustomers,butalsotheindirectusageoftheirproductsdowntheline.

Secureprocessingisthereforeonlyoneaspectofprepaidcardsecurityoverall.Issuersmustthoroughly

analyzetheprepaidprocessorscapabilitytoalsoprovideAMLandKYCcapabilities,aswellasother

homelandsecurityinitiatives.Theseissuesarestandardforprocessorsfamiliarwiththefinancial

institutionregulatoryarena,butinrealitysometimesfalloutsidethesetofcorecompetenciesfor

prepaidpointsolutionprovidersandprocessors.Canthefollowingprocessesbehandledefficiently

fraud,riskmitigation,compliancetools,flexibilityinrulesets,parameters,reporting,onbehalfof

services.Securityandpeaceofmindintheprepaidplatformcanbeviewedinvariousways.The

followinganglesareparamountwhenanalyzingthesecuritycapabilitiesoftheprepaidprocessor:

Thesecurityofastablesystem;

Thesecurity(i.e.,confidenceandpeaceofmind)fromworkingwithanexperiencedpartner;

Thesecurity(i.e.,protection)fromfraudrisksandscams;and

Thesecurityinknowingthatoneiscomplyingwithcompanyandregulatorypolicies.

Whenalltheseabovesecurityquestionsareadequatelyandproactivelyaddressedintheplatform

decisionprocess,prepaidissuerscanmoveforwardandgrowtheirprogramsmoreeffectivelyandmore

securely.



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TransactionProcessingandAssociatedServicesMakeaCompleteCircle:CanYour

ProcessorHelpyouDriveStrategy?

Myth:ProcessorsNeedOnlyProvideProcessingCapabilities

Theprepaidprocessingplatformisonlyasgoodastheprocessorbehindit.Thebottomlineforprepaid

issuersistheformationofaconsultativerelationshipwiththeprepaidprocessor,somethingthatin

realitynotallprocessorscaneffectivelyprovide.Theprocessormustprovideknowledge,expertise,

andstrategicdirectionaswellasprofessionalservices,integrationandtransactionprocessing.Partof

theevaluationthatallprospectiveprepaidcardissuersmustmakeiswhethertheprocessorhasthe

marketknowledgetotrulydrivethebusinessanticipatingfutureneeds,fleshingoutandmanaging

expectationswhicheverdirectiontheissuermaytake.Thepathtorevenueandprofitabilityisnotthe

sameforafinancialinstitution,amerchant,andotherthirdpartyissuers.Successfulprepaidprocessors

willproactivelyevaluatethemarketopportunitywiththeirclients,notreactivelybuildsolutionstomeet

thepredefinedneedsofthoseclients.Often,thoseneedsarenotpredefinedorevenknown.The

expertisethattheprocessorbringstotherelationshipmayprovetobestrategicallyinvaluable.Issuers

mustask:Isthisvalueinherentintheplatform,orarethebuilds(extensions)reactivetocustomer

needs?Thevalueoftheconsultativeprepaidprocessingrelationshipreachesbeyondtechnical

integration.Strategically,theplatformprovidermustbeabletoproactivelycreateneedscenariosand

drivetheclienttotheunderstandingofhowtobestdevelopproductsthatdriveprofitabilityandfully

leverageprepaidcapabilities,leadingtogreatercustomizationcapabilitiesandinturn,greater

customizationinimplementations.



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CanCreditandDebitExperiencebeLeveragedinthePrepaidSpace?

Myth:CreditandDebitCardProcessingExperienceandArchitectureisIllSuitedfor

Prepaid

Therehasbeenanabundanceoftechnologyapproachestoprepaidprocessingsystems,andinturna

varietyofmodelshaveemergedwhichpromisebothanopensystemandopenarchitecture.Promisesof

newer,cheaper,better,andfasteraboundintheprepaidprocessingspace.Therealityisthat

experienceisnecessarytofullybuildavailability,security,andflexibilityintoaprepaid

platformthatmeettheneedsoftoday'smarketswiththecapabilitytoeasilyaddresssubsequentyears

continuedgrowth.Leveragingthatexperienceeffectivelydeliversvalueforissuersandprogram

managers,aswellasforprepaidcardusers.

Theprovenflexibilityandavailabilityofcreditanddebitcardplatformshavebeenutilizedasthecore

processingengineforprepaidplatforms,withopensystemsintegrationtoseamlesslyextendthose

servicesintootherplatformsviawebservices,includingthefollowingfunctionality:

Inventorymanagement

Fraudandriskmanagement

Nonfinancialtransactionprocessing

WebandIVR

Fundamentally,thedifferentiatorofthecreditordebitcardplatformatitsfoundationistheavailability

oftheprocessingengineandtheflexibilitythatcanbeprovidedthroughtheadditionofdistributed

architectureprinciplesandtechnologies,abalancethatpointsolutionsandplatformsmaynotfully

address.



20/22


ConversionsarePainfulImplementations ShouldnotBe

Myth:ImplementationandConversionCapabilitiesareaDimeaDozen

Whatrecorddoestheprepaidprocessorhavewithnewprepaidcardprogramimplementationsand

conversionsofexistingprograms?Thesequestionsmustgowellbeyondthetimetabletobeupand

running.Quickimplementationdoesnotalwaysequatewithworryfreeimplementation.Howdoesa

processordifferentiatebetweenaconversionandamigration?Whatarethecompellingreasonsforthat

migration?

Alargepartoftheconsultativerelationshipisthecoreimplementationandthemigrationorconversion

knowledgethattheprocessorbrings.Implementationsshouldnotbepainful.Theyshouldbethoughtful,

withheavyplanningintheearlystages.Heretoo,experiencecounts.Theabilitythattheprocessorhas

tomaketheimplementationorespeciallytheconversionaspainlessaspossiblefortheprepaid

issuer,potentiallyhandholdingthroughtheprocess,willprovetobeinvaluable.Someprepaidissuers

wouldratherstaywithaprocessorthatdoesnotmeettheirgrowthneedsthangothroughthe

perceivedpainofaconversion.Processorswithprovenconversioncapabilities,andofcourseproven

robustplatforms,

can

enable

prepaid

issuers

to

realize

the

full

potential

of

their

prepaid

programs.

In

reality,thiscapabilityisaprovendifferentiatorforselectprocessors,andissuersmustdigdeeptofind

thatcapability.



21/22


IstheProcessorPreparedtoEmbraceTechnologyEvolution?

Myth:TechnologyisIrrelevantandStagnantinPrepaid

Furthertotheproactiveandforwardthinkingthataprepaidprocessormustprovideisthecapabilityto

expandastechnologyexpands.Technologyenhancementsenablefurtherexpansionofprepaid

programs.Thestandardmagneticstripe,creditcardformfactorforprepaidproductsmayevolveas

othercardproductsandthepaymentsinfrastructureevolve.Thisincludescontactless(standardcard

formfactor,

key

fobs,

others),

and

virtual

prepaid

cards

embedded

in

mobile

handsets

or

other

mobile

devices.Uniqueandinnovativesolutionsandtherealizationofmoresolidprepaidprogramsmaybe

linkeddirectlytotechnology.Prepaidissuersmustthereforeaskwhethertheprocessorispreparedto

takeadvantageofcapabilitiesandcorrelatedpotentialsourcesofgrowthsuchascontactless.Isthe

processorattheforefrontofallpaymentinitiatives,orlackinginbreadthandhencemissingouton

expansionpossibilities?Inreality,thismatters.

FinancialInstitutionReactionandNeedsarefocusedMoreonBrand

Financialinstitutionsandthosecompaniesthatarepartofthesupplychainwhohelpbringprepaid

cardstomarketbenefitfromnotonlytheprocessingrelationship,butalso thepowerofstrong,trusted

brandsboththeirownand thoseofthepaymentnetworksinextendingtovariousprepaidproduct

categories.Dependingonthesizeoftheinstitutionandthenatureofthecardprogram(howrobust,

howmanycardsissued,thetypesofproducts,etc.),the

financialinstitutioncouldrelyheavilyonthecardbrand

andtheinherentprepaidcapabilitiesofthecardnetwork.

Anyprocessordecisionmustthereforetakeintoaccount

therelationshipandinteractiontheprocessorhaswith

anyandallcardbrands.



22/22

Thereareanabundanceoffactorsthatprepaidissuersmustconsiderinestablishingarelationshipwith

aprocessor.Theprocessordecisionisnotonetobetakenlightly.Astheaboveevidenceindicates,the

analysisofaprocessorfitismultifaceted.Primarily,issuersmustremembertolookforthefollowing

keyaspectsandstrengthswhenchoosingaprocessor:

Aprovenrecordofastable,reliableplatform

Productbreadthandevolutioncapabilities

Scalability

the

inherent

capability

of

the

prepaid

processor

Theprocessorsabilitytoserveasaconduittoproductexpansion

Experienceandlinktomajorcardbrands

Provenrecordinmanagingallfacetsofthecardprogram

Cardcreation

Cardload

Retailtransaction

Transactionauthorizationmanagement

Cardholdercare

Riskandexceptionmanagement

Technologyevolutioncapabilities

Consultativerelationship

Theproductiverelationshipbetweenprepaidissuerandprocessorisonethattakesfulladvantageofall

capabilitiestheprocessorhas,movingwellbeyondsimplenutsandboltstransactionprocessingtoanin

depthinteraction.Theparagonbeingasituationinwhichtheissuercanrelyontheprocessorformore

completeprogrammanagementassistanceandcollaboration.Thisisnotaneasysituationtocreate,and

itrequiresadeeperlevelofanalysisonthepartoftheissuer.Onceitisattained,however,the

possibilitiesforexpansionoftheprepaidprogramareenhancedmanyfold.

IncollaborationwithVisaDebitProcessingService,Javelinhaswritten,ChoosingaPrepaidProcessorinanEvolvingMarket:AStudyonIssuerandProgramManagerNeeds. VisaDebitProcessingServicepartiallyunderwroteJavelinscostofdatacollection,analysisandreportinginthisstudy.Javelinretainscompleteindependenceofdataanalysisandreporting,andthisreporthasbeen

createdsolelybyJavelinemployees.

SummaryandWrapupKeyConsiderations

for

a

Prepaid

Processing

Relationship

prepaid processing javelin 11-5-08

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