Fed’s Final Gift Card Rules: A Game Changer for the Prepaid Card Industry in the U.S. (March 2010)

March 2010

By Judith Rinearson, Partner, and Margo Hirsch Strahlberg, Associate, Bryan Cave LLP

On March 23, 2010, the Federal Reserve Board (Fed) issued its long-awaited final rules (Final Rules) amending Regulation E in connection with Title IV of the Credit Card Accountability Responsibility and Disclosure (CARD) Act. Not unexpectedly, the Final Rules mean some big changes for prepaid card businesses in the United States, and many companies are already scrambling to understand the full effect of the Final Rules and to implement the significant marketing, communications, processing and operational changes the new rules necessitate.

Although the Final Rules focus on gift certificates and gift cards (open-loop/network branded cards and closed-loop/store gift cards), some of the new requirements touch other types of prepaid products as well, making it necessary for all business participants in the prepaid community to become familiar with the new requirements—even if gift cards aren’t part of their prepaid product sets.

The purpose of this article is to identify the key game-changing effects of the Final Rules and to support industry members on their paths to compliance. Please note that this article is intended for general information purposes only and should not be construed as legal advice. You are urged not to act on the information in this article without consulting an attorney.

What’s In, What’s Out

The Final Rules apply to all gift certificates, store gift cards and general use (i.e., open-loop or network branded) gift cards sold or issued to consumers primarily for personal, family or household purposes. As expected in consumer protection regulation, the key areas encompassed are fees, expiration dates and disclosures.

The Final Rules specifically exempt from coverage cards, codes or other devices that are:

  • Useable solely for telephone services
  • Reloadable and not marketed or labeled as gift cards or gift certificates
  • Loyalty, award or promotional gift cards (See the section on Special Case of Reward Cards below.)
  • Not marketed to the general public
  • Issued in paper form only
  • Redeemable solely for admission to events or venues

For many in the prepaid industry, the most important takeaway from this list of exemptions is that general purpose reloadable (GPR) prepaid cards are not covered. (See the gift card display requirements discussed in “Potential Effect on Non-Gift Reloadable Prepaid Cards,” below.)

Effective Date

There is no transition period under the Final Rules; all cards sold or offered for sale must be compliant effective Aug. 22, 2010. (See the “Special Case of Reward Cards,” below, for an exception.) Cards purchased prior to that date are not subject to the Final Rules. The absence of a transition period—and with less than five months until the effective date—will surely generate a deluge of new plastic and packaging orders. The lack of a sufficient transition period has caused great consternation among both open- and closed-loop card issuers and other members of the prepaid industry.

Most Affected: Open-Loop Gift Cards 

Because open-loop gift cards are heavily reliant on fees and their DNA includes expiration dates, the Final Rules will have the greatest impact on this category of prepaid cards.

Fees. The Final Rules effectively eliminate “dormancy, maintenance and service” fees for the first 12 months after purchase (and until there is 12 months of inactivity). In addition—thanks to a strained definition of “service fees”—the Final Rules also effectively eliminate balance inquiry, ATM, reload and per transaction fees until after 12 months of inactivity. Once a card is inactive for 12 months, the issuer may choose each month between debiting either the maintenance/service fees or any other “activity-based fee,” since only one “service” fee per month may be charged.

Replacement card fees also are prohibited if the underlying funds remain valid (i.e., available to the consumer). All other fees, such as initial issuance fees and cash-out fees, are permitted but must be disclosed either on or with the card prior to purchase. And, fees may not be changed after a card is purchased.

Our interpretation of these requirements banning certain types of fees and restricting when others may be assessed is that the goal of the drafters was to encourage higher upfront purchase fees and discourage post-purchase service or activity fees. This approach is likely to make open-loop gift cards more expensive for all consumers by encouraging higher purchase fees, rather than the current model of relatively low purchase fees with back-end service and activity fees imposed on a relatively small percentage of gift card owners based on their card usage behaviors.

Expiration Dates. The restrictions on expiration dates will have a greater impact on open-loop gift cards than on closed-loop cards, which typically don’t have expiration dates. The Final Rules require gift card issuers to have “policies and procedures in place that provide consumers with a reasonable opportunity to purchase a card that has an expiration date that is at least five years from the date of purchase.”

Further rules and commentary regarding what those policies and procedures need to address make the following clear:

  • As of Aug. 22, 2010, no gift cards with less than five years validity should be on store shelves or j-hooks.
  • Issuers that want to include expiration dates have two choices. They may choose to:
    • Have procedures to ensure that cards with expiration dates of less than five years aren’t sold (for example, using an activation process that won’t activate cards with less than five years validity), or
    • Make available to consumers gift cards with at least five and a half years validity (for example, by delivering inventory to store shelves with valid dates of at least five years and six months, or more).

And, when it comes to expiration date disclosures on cards, issuers also have two choices. They may:

  • Offer cards that are valid for at least seven years from date of production (using this option means only the expiration date would need to be disclosed on the front of the card), or
  • Produce cards with less than seven years validity and include a disclosure on the front of the cards—in close proximity to the expiration date—stating, essentially: “Card may expire but funds don’t expire” (or “funds expire at a later date”) and “Contact issuer for replacement card.” The replacement card must be provided free, unless the card has been lost or stolen.

Disclosures. Clear and conspicuous disclosures are required for all gift cards:

  • Prior to Purchase. The following disclosures are required to be made to consumers prior to purchase: (i) dormancy, inactivity or service fees, (ii) all other fees such as initial issuance fees and cash-out fees and (iii) the terms and conditions of expiration of the funds.
  • Certain Changes in Terms Forbidden. It is prohibited to change any of the above listed terms (such as fees) included in the “prior-to-purchase” disclosures after the purchase is made.
  • On-Card Disclosures. The following items must be included on the card itself:
    • The amounts, frequency and circumstances of any dormancy, inactivity or service fees.
    • The expiration of the funds (or if the underlying funds do not expire, that fact).
    • A toll-free telephone number consumers may call for fee information or to order replacement cards.
    • A Website consumers may access for fee information or to order replacement cards. (This disclosure is required only if a Website is maintained for such purposes. There is, however, no requirement to maintain a Website.)
    • If the seven-year manufacture option is not selected, a statement relating to the funds not expiring (or expiring later) and how to get a replacement card.

Impacts on Closed-Loop Gift Cards

The Final Rules’ fee and expiration date requirements also apply to closed-loop gift cards, typically what we think of as retailer or store-branded cards. But, because the number of closed-loop programs with fees/expiration dates is relatively small, the Final Rules likely will not necessitate the significant changes in that sector—at least compared to the changes facing the open-loop segment of the industry. (Before getting too comfortable, though, please reread “Effective Date,” above.)

Any retail, restaurant or store gift card issuers whose cards do include fees/expiration dates must comply with the requirements applicable to open-loop gift cards. And, note, some closed-loop gift cards may have fees other than service/maintenance fees, such as balance inquiry fees. As described above, those fees also are impacted by the Final Rules.

If a gift card has neither fees nor expiration dates, no specific disclosures are required.

The Special Case of Reward Cards

Loyalty, award and promotional (collectively Reward) cards may be open- or closed-loop products, which is why we’ve given them their own category in this article.

The good news is that Reward cards (many of which have short expiration dates and some of which may have fees) have been exempted from the Final Rules’ requirements relating to fees and expiration dates, provided they meet the definition of “a card, code or device” that:

  • Is issued on a prepaid basis primarily for personal, family, or household purposes to a consumer in connection with a loyalty, award or promotional program,
  • Is redeemable upon presentation at one or more merchants for goods or services, or usable at automated teller machines, and
  • Sets forth [certain] disclosures, as applicable.

The challenge with Reward cards under the Final Rules involves disclosures. The Final Rules require disclosure on the front of the card that indicates the card is issued for loyalty, award or promotional purposes (it is probably sufficient if the card is conspicuously labeled “Reward” or “Promotion”) and the card expiration date. These cards also must display, on either the reverse or front, a toll-free telephone number (and Website, if there is one) that consumers may use to inquire about the card. In addition, information about the amount of any fees and the conditions under which fees may be imposed must be disclosed—either on the Reward card or in accompanying materials.

In a twist on the Final Rules’ effective date, the requirement for Reward card disclosures applies only to cards associated with promotional programs if the period of eligibility began on or after Aug. 22, 2010. It appears, therefore, that a one-year promotional gift card program commencing on Aug. 1, 2010, for example, would not need to use compliant plastic that includes the new disclosures, even though the program extends well past Aug. 22, 2010.

Potential Effect on Non-Gift Reloadable Prepaid Cards

As noted in “What’s In, What’s Out,” above, non-gift reloadable prepaid cards (such as payroll, teen, tax refund and GPR cards) are exempted from the Final Rules. And, the reality is, such prepaid products likely could not survive in their current forms under the strictures placed by the Final Rules. The Final Rules, however, make it clear that the exemptions can be easily lost, which should motivate issuers and sellers to adhere strictly to the requirements of the Final Rules.

Specifically, to be exempt from the restrictions and prohibitions in the CARD Act and the Final Rules, the following conditions apply:

  • The Card Must Be Reloadable. A card is “reloadable” only if its terms and conditions allow for funds to be added after the initial issuance or purchase. A temporary non-reloadable card may be eligible for this exemption as well if it is issued solely in connection with a reloadable card. The reloads can be accomplished by the consumer or a third party (such as an employer). But, the mere fact that a load is technologically possible to implement does not make the card “reloadable” if the reload functionality is not marketed and included as a feature of the card.
  • The Card Must Not Be Labeled as a Gift Card. To benefit from the exemption, cards should not be called gift cards nor designed to look like gift cards (such as with ribbons, candles, birthday greetings, etc.). However, even taking all the right steps to avoid a card being mistaken for a gift card (e.g., not designing the card to look like a gift card, not mentioning gift giving and including a “not-a-gift-card” disclaimer on the outside packaging) may not be sufficient to secure the exemption. Additional disclosures are needed such as POS and point-of-purchase signage where the cards are displayed. Special attention should be given to the placement of open-loop prepaid cards on gift card displays. The Final Rules give several examples of when an in-store card display preserves or undermines the exemption. What’s clear is that one should never sell non-gift reloadable cards on a shelf labeled “gift cards.”
  • The Card Must Not Be Marketed as a Gift Card. Marketers of open-loop prepaid cards should be careful not to promote these cards as a gift in any way, shape or form. Not only should words such as “gift” or “present” be avoided, but the inclusion of a congratulatory message or a gift-giving/celebratory image or motif must not be used on marketing materials. In addition, policies and procedures necessary to avoid potentially misleading marketing (such as controls to regularly monitor or verify that the cards are not being marketed as gift cards and merchandising guidelines covering how the cards must be displayed in a retail outlet) should be adopted.
  • Limiting Liability among the Card Supply Chain. A card may potentially lose its exempt status if any party in the distribution chain promotes the product as a gift card. As a result, the only protection from another party’s actions is establishing internal policies and procedures to ensure this from happening, in addition to contractually designating the responsibilities and possible consequences of another party’s detrimental actions. Absent this due diligence, the risk of repercussions for non-compliance increases drastically.

Other Issues Raised by the Final Rules

There is much more to the Final Rules beyond the basic fee and expiration date restrictions and disclosure requirements. The 104-page publication provides significant detail covering specific aspects of the Final Rules including insights, additional guidance and discussion of the types of comments the Fed received in response to its proposed rules.

As industry members rush to digest the “dos and don’ts” of the Final Rules, many other practical concerns are surfacing including:

  • Federal Preemption. The Final Rules provide that a state law is not inconsistent with the new CARD Act and regulations if the state law provides greater protection for consumers than under the CARD Act. If so, the state law would not be preempted. Although commentators pointed out the conflict with some state escheat laws, the Fed refrained from declaring that any state’s abandoned property law was inconsistent with the federal laws. The Fed, however, reserved the right to make a determination “upon its own motion or upon the request of a state, financial institution or other interested party” as to whether the act preempts “state laws regarding electronic fund transfers, dormancy, inactivity, service fees” or expiration dates.
  • Card “Real Estate” Issues. The Final Rules set forth the various disclosures required on the card itself. This includes the amounts, frequency and circumstances of any dormancy, inactivity or service fees, expiration policies regarding the funds (or if the underlying funds do not expire, that fact) and a toll-free telephone number and Website address for accessing additional card-related information. Furthermore, if the card’s expiration date is less than seven years, an on-card disclosure must be included indicating the card expires but the funds either do not expire or expire later and the consumer may contact the issuer for a replacement card. What’s most challenging about this last requirement is there’s not enough room to include this information on the back of the card and the funds expiration disclosure must be made with equal prominence and in close proximity to the expiration date on the front of the card. How will issuers balance the required on-card disclosures with the limited “real estate” available?
  • Inability to Revise Certain Terms. Consumer disclosures required prior to card purchase are prohibited from being revised after purchase. This includes disclosures related to all fees and the terms and conditions of expiration of the funds.
  • Broad Fee Prohibitions. While the Fed stopped short of imposing fee caps, it did adopt a broad definition of the term “service fee,” thereby expanding a term that is generally understood to refer to monthly administrative or maintenance fees to include other isolated or one-time fees such as per transaction, balance inquiry, ATM and reload fees.
  • Policies and Procedures. The Final Rules require considerable “policies and procedures” to be established before the effective date. Not only must policies and procedures be in place to ensure against improper marketing of an otherwise exempt card, but issuers and sellers also must adopt policies and procedures to ensure consumers will have a reasonable opportunity to purchase a card with at least five years remaining until the card’s expiration date.
  • No Transition Rules for Cards Currently in Market. Above all, the biggest concern for the industry is the Aug. 22, 2010, compliance date. The absence of any transition rules for cards already in market makes it difficult to ensure compliance while maintaining a high level of consumer access. And, whether it’s a serious initiative or not, Sen. Charles Schumer (D-N.Y.) recently announced he intends to work with the Fed to “speed up the effective date rather than keep consumers at risk of being ripped off until next summer.”

What’s Next?

While the industry grapples with the significant compliance burdens it faces between now and Aug. 22, 2010, the Fed hinted at possible future rulemaking on matters such as whether federal law preempts a particular state’s abandoned property law and whether certain Electronic Fund Transfer Act protections should be extended to holders of prepaid cards (such as periodic statement requirements and error resolution obligations). The Fed also stated it will be monitoring the gift card market as it adjusts to the new rules to ensure that the downward trend in dormancy, inactivity and service fees continues.

In other words, the challenge is just beginning.

2010 Paybefore Awards: Best Web Sales Channel (March 2010)

Best use of online channel to sell network branded, closed-loop or RAN prepaid products.

March 2010

By Paybefore Staff

Best in Category: GiftCardMall.com, Blackhawk Network

In early 2009, Blackhawk Network, the largest provider of third-party gift cards in the United States and Canada, responded to the dual trends of growing consumer demand for gift cards and Internet shopping by rolling out its Gift Card Mall online. The launch was the culmination of a year-long pilot program, with dedicated research, testing and customer feedback to ensure Blackhawk’s standards of providing consumers with choice, flexibility and convenience in purchasing its prepaid products.

In its first month of official launch, unique visitors to GiftCardMall.com increased 90 percent, and total page views increased 82 percent from the prior month’s pilot phase during the 2008 holiday shopping season.

GiftCardMall.com offers card delivery via email or traditional mail, as virtual or physical gifts. Visitors to the Website can shop by occasion, type of recipient, retailer or retail category. Many of the physical cards may be customized by uploading photos and images. In addition, new customization options, such as premium greeting themes, are now available to accompany physical gift cards sent through regular mail.

Virtual gift cards, or e-gift cards, were first offered in fall 2009, giving consumers the added convenience of purchasing gift cards online anywhere and anytime, with delivery via email within hours of purchase. Recipients can redeem the virtual gift cards online through the retailer’s Website or print out the gift card for use at the retailer’s store locations.

Blackhawk Network is the exclusive provider of branded, third-party gift cards on GiftCardMall.com and through a growing network of Internet partners, including Amazon.com, Drugstore.com and Facebook.com, where users can purchase and send iTunes Online Gifts. 

By leveraging the exposure and excitement of the 2010 Winter Olympics, Blackhawk partnered with Visa to bring Olympic gift cards to market. GiftCardMall.com is the only provider of Visa Olympic-themed gift cards on Visa’s Olympic micro-site, which began in early November 2009.

Winners: GiftCards.com, GiftCards.com, LLC

Giftcards.com sells Visa gift cards to consumers and corporations through a flexible, feature-rich Website that provides customers with a superior gift-buying experience. Founded in 1999 as a gift certificate Website, directcertificates.com, the Website converted to selling Visa gift cards in 2003, as GiftCards.com. Since then, the company has grown by almost 100 percent annually, expanding its prepaid services to become a consumer favorite and a leading provider of corporate gift cards.

With more than 200 card styles, customers can search for a specific card or browse through card categories such as birthdays, weddings, holidays, and dozens more. With multiple card and packaging options, any value up to $500 may be loaded onto a card, for delivery online through a virtual card or by mail as a physical card. Buyers may customize physical cards with a photo or embossed message and select from among a free paper carrier, a GiftCards.com predesigned greeting card or a custom greeting card.

In addition to network branded cards, the Website sells discounted merchant gift cards for hundreds of popular merchants at discounts up to 25 percent of the card value. And, cardholders can sell unwanted gift cards from select retailers to Giftcards.com and receive payment by check.

Giftcards.com isn’t just about cards. The Website allows customers to integrate with social networks or friends and family for fundraising activities. It also has launched an iPhone application to help cardholders and purchasers order and manage cards.

GiftCards.com’s corporate programs are operated by its sister company, Omni Prepaid, and include program management and fulfillment for consumer promotions and corporate incentive card programs.

Winner: RushCard, UniRush, LLC

RushCard.com is the primary online channel for prospective cardholders to learn about and apply for the Prepaid Visa RushCard, the successful GPR card program launched in 2003 by entrepreneur and philanthropist Russell Simmons.

RushCard’s overarching online strategy is to listen to prospective and current members’ needs and anticipate online money management trends. Launched in July 2009, the redesigned RushCard Website has all the tools for cardholders to become financially empowered:

  • Online Money Tools to set, monitor and review budgetary goals
  • RushText Alerts for balance, deposit and transaction information
  • Merchants-based rewards programs for discounts where the card is used most
  • Online bill pay
  • RushPath to Credit to build credit history with each bill payment
  • ReferaFriend rewards

Search engine optimization and online advertising help draw visitors to the Website. And, RushCard uses a network of affiliates to market its program including Edebitpay, Partner Weekly and cardoffers.com. RushCard also has appeared in the NewYorkTimes.com, BET.com, and GlobalGrind.com, the largest hiphop site online.

Cardholders have provided overwhelmingly positive feedback, and the rate of those who visited Rushcard.com and applied for a card before departing the site has increased significantly. RushCard.com had 553,000 visitors in October 2009, about four times more than the prior year.

RushCard.com equips its customers with the right tools to take steps toward better money management and financial freedom, and now is providing Free Prescription Discount Cards to its members.

Outstanding New Entrants: AccountNow’s “Finally Credit Free” Website, AccountNow, Inc. and Meta Payment Systems

With the backdrop of the global credit crisis, AccountNow set out to highlight a positive option for consumers who had gotten in over their heads in terms of their bank credit cards and for those who wanted to impose self-discipline to avoid potential credit card problems.

In April 2009, AccountNow launched its “Finally Credit Free” Website for its AccountNow Visa Prepaid Card, a GPR product. The Website leverages AccountNow’s prepaid card platform and vast online presence to create a user-friendly, informative resource that is helping consumers live credit free every day.

The product in back of the “Finally Credit Free” Website—the AccountNow Visa Prepaid Card—helps consumers who wish to avoid the costs associated with credit: There are no late fees, no overdraft fees and no finance charges. Yet, cardholders still have the benefit of worldwide card acceptance, free direct deposit and cash loading at more than 135,000 locations. The card also offers low-cost, value-added services such as online bill pay, refer-a-friend incentives and prepaid mobile minutes—all designed to help consumers live credit-free.

To further engage the primary target market of consumers seeking more control over their spending, AccountNow is developing “Debt-free” Website content for consumers to learn how to save money and live within their means, without the use of credit.

With numerous customer accolades, AccountNow has provided an anecdote for America’s credit crisis: access to financial services without the sting of penalties or debt.

Outstanding New Entrant: Spiffs.com, MTC Performance

Spiffs.com is the first and only online community that brings multiple brands and multiple partners together to provide spiff incentives in one place. Going way beyond individual incentive programs, Spiffs.com is a technology-enabled reinvention of the way spiffs are promoted, processed and paid.

A spiff is an incentive reward paid by a manufacturer or employer directly to a salesperson for selling a specific product or service. Traditionally, spiffs consisted of trips, product rewards or cash incentives. Catering to the overwhelming preference of salespeople, the program offers cash rewards through the Spiffs.com Visa Prepaid Card.

Spiffs.com provides a unique platform, where approximately 3,000 IT software and hardware manufacturers can promote their solutions to the entire targeted sales community. Spiffs.com also provides convenience for the industry’s 150,000 resellers and one million IT sales influencers. In one easy-to-use online interface, salespeople can view all available industry spiff opportunities, submit claims and track rewards that are loaded onto their Spiffs.com Visa Prepaid Card.

The spiff market has been estimated to be in excess of $12 billion dollars annually in North America. The initial IT spiff card program is expected to penetrate more than 100,000 sales reps, 5,000 resellers and 500 IT manufacturers in the next 24 months. Expansion is planned in other vertical markets including office supplies, automotive, pharmaceuticals and finance/insurance.

2010 Paybefore Awards: Best Third-Party Prepaid Product Retail Program (March 2010)

Best use of third-party prepaid products by a brick-and-mortar retailer.

March 2010

By Paybefore Staff

Best in Category: Walgreens, Walgreens and InComm

Walgreens and InComm have partnered to develop a new prepaid card retail sales program built around a strategic product display and unique card suite, highlighting more gift cards per linear foot than any other prepaid drugstore retailer.

Through its partnership with InComm, a leading prepaid retail distribution provider, Walgreens created a uniform gift card destination within its stores nationwide, with 75 unique gift card offerings for more than 200 products including new and exclusive cards for gaming, digital content and retail stores as well as first-to-market prepaid card products for financial services.

Strategy for the new program focused on improving physical card displays to optimize the variety of card partners and to simplify the consumer card shopping experience. Walgreens tripled the size of its physical card displays to increase the number of cards offered in-store by up to 83 percent from previous store layouts.

Based on research demonstrating high correlations between the sales of candy and greeting cards with gift cards, Walgreens designed a card display for the end of its store greeting card and candy aisles. Creating a uniform “gift destination” has improved the overall shopping experience for customers and provided a significant benefit not only for prepaid gift card sales but also for card and candy sales. Walgreens’ product placement innovation already is a success, having out-performed all other retailers in sales of InComm’s Vanilla Visa birthday gift card.

Launched in approximately 7,000 retail locations in advance of the 2009 holiday season, Walgreens positioned this new consumer-centric retail initiative as a unique solution to consumer gifting needs that is more convenient, exciting and relevant. Effective marketing, innovative design and exclusive product have resulted in explosive store sales.

Winners: ACE Cash Express

ACE Cash Express, a leading provider of alternative financial services to the unbanked and underbanked, offers GPR cards in more than 1,700 full-service retail offices in 38 U.S. states. ACE was one of the first retail financial services companies to offer GPR cards, selling its first card in January 2002. Since then, ACE has sold more than 2.6 million cards with loads of more than $9.3 billion.

In July 2008 ACE lowered the purchase price of its cards to $3.95, making it likely the first retailer to offer GPR prepaid cards below the $4 price point. ACE also encourages its check-cashing customers to use its free direct deposit service to load funds to their cards. Customers who participate in direct deposit on an ACE card get the added value of free cash withdrawals at ACE locations. More than 310,000 cardholders have enrolled in the direct deposit program since it was introduced in January 2004.

ACE offers 10 unique graphic card designs, and customers use the exclusive “Pick Your Plastic” process to select the design of their choice during card activation. ACE and its partner NetSpend also support two exclusive “Giving Cards”: the March of Dimes Visa Prepaid Card supporting baby health, and the Pink All-Access Visa Prepaid Card, a breast cancer awareness card that donates a portion of card purchases to the National Breast Cancer Foundation. More than $900,000 has been donated to the National Breast Cancer Foundation by ACE and NetSpend through the use of more than 300,000 Pink All-Access Prepaid Visa Debit Cards since October 2006.

MoneyGram AccountNow Prepaid Visa Debit Card, AccountNow, Inc., MoneyGram International and Meta Payment Systems

The MoneyGram AccountNow Prepaid Visa Debit Card Program launched in August 2009 at select MoneyGram agent locations throughout the United States. The co-branded card program replaces the previous prepaid program operated by MoneyGram and introduces AccountNow, with hundreds of thousands of active prepaid cardholders, to the retail space.

The new program built on AccountNow’s agreement with MoneyGram to provide reload services for AccountNow card programs at more than 40,000 MoneyGram ExpressPay agent locations in the United States. The new partnership combines MoneyGram’s network of retail agents and AccountNow’s expertise in prepaid to provide consumers with greater access to a valuable prepaid product.

While prepaid cards complement the extensive suite of MoneyGram products for underbanked consumers, its initial program was unable to overcome the challenges of being run by a large, multi-faceted corporation. As the new card program manager, AccountNow brings a singular prepaid focus to the joint venture.

The lack of prepaid expertise for managing the previous MoneyGram card offering resulted in hesitancy by some agents to sign up for the new prepaid program. These challenges are being overcome by dissecting and recreating broken processes, and concentrating on card sales and customer and agent service.

The features, benefits and fee structure of the MoneyGram AccountNow Prepaid Visa Debit Card program compare favorably to others in the marketplace, empowering consumers with a better way to make everyday purchases, pay bills and receive payroll and benefits deposits.

The program offers customers a single-value, instant-issue prepaid Visa card at their local MoneyGram retailer and the ability to begin using it immediately. During card activation, customers who pass the identification process are automatically converted from an instant-issue card to a personalized card.

The joint marketing tagline, “The best alternative to a bank account,” emphasizes the positioning and the consumer value proposition. In addition, product features—such as free direct deposit and online bill pay—generate customer loyalty and profitable, long-term relationships, providing revenue for AccountNow and its partners.

Within 60 days of launching the program, more than 1,000 MoneyGram retail locations began offering the co-branded card, and several hundred new locations are added monthly. Positive retail acceptance is the result of a strong partnership to offer a feature-rich card with excellent service and training at the very locations where many underbanked consumers shop daily.

Outstanding New Entrant: Money Centers, NovoPayment, Inc.

Latin American program manager NovoPayment launched its first prepaid products in 2004 with the goal of providing financial empowerment to the region’s large unbanked population through the convenience and security of network branded cards. Since then, the company and its partners in Mexico, Venezuela and Peru have collaborated to introduce a variety of prepaid card programs including GPR, EBT, telecommunications and gift—along with cash management solutions.

Money Centers take NovoPayment’s work to the next level, deploying physical structures in retail environments that serve as sales, reloading and customer service centers for the company’s varied GPR and gift programs. Money Centers are a key component of NovoPayment’s vision for a retailer-based prepaid “branch” network that meets high security and regulatory standards, while providing a convenient, quality customer experience. Each Money Center supports sophisticated back-end/operational processes including card stock controls and cash box management to name a few.

Money Centers typically reside inside a shopping mall or similar secure commercial space that is accessible to or highly trafficked by unbanked and underserved consumers. Consumers may visit Money Centers to purchase GPR or gift cards. They complete the identification process, purchase a card and load funds. Even the purchase of a GPR card takes less than 10 minutes, after which GPR cardholders can make purchases, withdraw money from an ATM or even transfer money to another cardholder via SMS.

Cardholders also may use Money Centers for a variety of customer service needs such as replacing lost or stolen cards, obtaining a hardcopy of their transactions and conducting balance inquiries—which also are available by phone, SMS and Internet—and paying bills such as utilities.

Money Centers are currently available in Electricidad de Caracas offices in Caracas and Sambil Malls throughout Venezuela. Plans are in the works to extend Money Centers to additional Latin American countries.

To make this program a reality, NovoPayment leveraged industrial design, logistics, process management, information technology, marketing and sales to create a robust, scalable physical network in convenient retailer locations to serve consumers in ways that have never been done before.

2010 Paybefore Awards: Best Closed-Loop or RAN Gift Card Program (March 2010)

Best use of a consumer-funded closed-loop or restricted authorization network gift card or line of gift cards.

March 2010

By Paybefore Staff

Best in Category: Downtown Gift Card Program, Downtown Boise Association, StoreFinancial

Unique and individual storefronts are an important part of any local economy, but they often have a difficult time competing with big-box retail chain stores and malls. The Downtown Boise Gift Card has been a successful marketing tool for attracting new customers for downtown Boise, Idaho, merchants. The multi-retailer, restricted authorization network (RAN) card program, offered by the Downtown Boise Association and powered by StoreFinancial, enables unaffiliated Boise merchants—linked only by their shop locations and membership in the Downtown Boise Association—to participate in a unified and user-friendly gift card program for a true “shop downtown” campaign.

For many years, the nonprofit Downtown Boise Association had managed a paper gift certificate program as part of its marketing plan of the downtown Boise Business Improvement District. As the paper campaign grew, the administrative burdens increased, especially with respect to tracking gift certificates and keeping cash on hand for merchant reimbursement. A more efficient and fraud-resistant solution was needed to maintain Boise’s downtown marketing efforts.

Downtown Boise Association’s search for an electronic gift card provider led to a partnership with StoreFinancial, an international leader in RAN gift card programs. StoreFinancial’s expertise readily translated to the special requirements of the downtown card, specifically ease of installation/merchant usability, consumer confidence and minimal administrative input. Since the program was introduced in 2005, the total value of cards sold has exceeded $1.3 million, with more than 34,000 cards sold. Today, more than 260 downtown merchants accept the Downtown Boise Gift Card including public parking garages. With an average of 7,000 cards sold each year, 7,000 new customers experience Boise’s downtown annually.

Consumers may purchase cards at three retail locations as well as through the association’s administrative office and the Downtown Boise Website. The program is marketed extensively throughout Boise, using print, radio, television and Website advertising. Participating merchants display acceptance of the card, and all merchants are listed in the downtown map and directory, available on the Downtown Boise Website and in most places the cards are sold.

The Downtown Boise Gift Card program gives cardholders the same gifting freedom they would find at any national retailer or shopping center, with more than 260 reasons to shop, dine and play in downtown Boise.

The Downtown Boise Gift Card program demonstrates the power of prepaid marketing and can be replicated by other downtown associations.

Winners: BP Aral SuperCard, PrePay Solutions

The Aral SuperCard program is a closed-loop loyalty, retail and fuel card program offered by BP Aral, Germany’s leading gas station brand and third largest fast food retailer. More than 2.5 million customers visit BP Aral stations daily to fill up on gas, wash vehicles, and/or purchase beverages or snacks.

Produced and processed by PrePay Solutions, the Aral SuperCard is the first product of its kind in Germany. It combines all the services and customer rewards that BP Aral gas stations offer in one innovative prepaid card. Replacing vouchers and rewards catalogs, the Aral SuperCard is a gas card, loyalty program and shopping device all in one.

With the Aral SuperCard consumers can opt for either a fuel-only or a full-service “Shopping and Fueling” card. They also have the freedom to select cards with set denominations of 10€ (US$13.65), 25€ (US$34.14), 50€ (US$68.28) or any value up to 200€ (US$273.04). Cards can be purchased online or at the point of sale and are supported by multilingual customer service and 24/7 online account management.

The SuperCard program has increased BP Aral’s overall sales by attracting new customers, strengthening loyalty of existing customers and reengaging former customers—all while enhancing brand awareness and driving down costs. More than two million cards were sold in less than three months and sales represent 50 percent of new business for BP Aral.

To leverage the groundbreaking prepaid presence of the Aral SuperCard in Germany, the company is interested in introducing similar card programs in countries that currently do not have widespread prepaid product availability.

The Aral SuperCard card program is supported by PrePay Solutions, a joint European partnership between Accor Services and MasterCard. PrePay Solutions is one of Europe’s leading prepaid services companies and draws on the strengths of its parent companies to deliver excellence in prepaid and electronic payment processing throughout 40 countries.

Winner: Starbucks Card Program, Starbucks

For yet another year, Starbucks continues to lead the way in shifting consumer behavior toward prepaid, with a keen awareness of customer needs and a variety of retail gift cards and services to match.

Through ongoing commitment to innovation, the Starbucks Card program has evolved in 2009 to include uniquely designed reloadable cards for all occasions, a Mini Starbucks Card for on-the-go customers, the Starbucks Card Mobile iPhone App, and a related mobile payment pilot program, Starbucks Card Mobile. In addition, Starbucks has expanded the channels for customer access and use of its card programs to include enhanced online purchase and card customization, as well as through more partnership and corporate sales programs.

In January 2009, Starbucks launched the (STARBUCKS)RED Card that includes a donation with each card purchase to help those affected with HIV/AIDS in Africa.

In December 2009, the company introduced the revised card customer loyalty program, My Starbucks Rewards, replacing the popular Starbucks Card Rewards and Starbucks Gold programs. The new program incorporates many suggestions from customers and corporate partners into one easy-to-use program, recognizing and rewarding more Starbucks customers with frequent, personalized rewards, including birthday drinks, purchase discounts and free Wi-Fi service.

In the current challenging retail environment, Starbucks has experienced an increase of 24.9 percent for average dollars reloaded on gift cards. And the number of individual cards reloaded last year has increased 25.8 percent.

Outstanding New Entrant: PizzaExpress Gift Card, G-T-P Group Ltd, PizzaExpress

Famed for bringing pizzas to the U.K. for the first time back in 1965, PizzaExpress is a high street restaurant institution known and loved by all.

In 2007, the restaurant introduced prepaid to the U.K. dining scene with the launch of the PizzaExpress Gift Card, the country’s first restaurant gift card. Operated by G-T-P Group Ltd., the PizzaExpress Gift Card is a closed-loop prepaid card that may be used as full or partial payment at any PizzaExpress restaurant in England, Scotland, Wales and Northern Ireland. Cards are sold in more than 3,000 locations, including PizzaExpress restaurants, retail gift card malls, over the phone and online.

PizzaExpress has expanded its program year-over-year with inventive promotions and partnerships, including:

  • Free PizzaExpress Gift Card with subscription to The Times national newspaper.
  • Gift cards and 20 percent discount on card loading in specially-marked PizzaExpress pizzas sold in Sainsbury’s, the third largest U.K. grocery chain.
  • Free £20 (US$31.27) PizzaExpress Gift Card with ticket purchases from Ticketmaster.
  • Summer Pass card giveaway in the Sunday Times and PizzaExpress restaurants and £40 (US$62.55) credit with three restaurant visits over £40 (US$62.55). More than 2 million cards were given away during PizzaExpress’ Summer Pass promotion, with significant activity on the cards.

PizzaExpress followed the U.S. precedent for successful hospitality gift card programs to pioneer replacing its traditional gift certificates with a cost-effective prepaid solution. By switching from paper to plastic, annual PizzaExpress gifting sales have increased tenfold up to 2008, with Christmas sales growing by as much as 184 percent annually. From 2008 to 2009 alone, PizzaExpress card sales increased 308 percent, with a 269 percent increase in card redemptions.

2010 Paybefore Awards: Best General Purpose Reloadable Program (March 2010)

Best use of a consumer-funded, reloadable network branded prepaid card for ongoing general use such as ATM access and purchasing.

March 2010

By Paybefore Staff

Best in Category: Green Dot GPR, Green Dot Corporation

The desire to provide consumers with the most innovative prepaid card at the most affordable price drove Green Dot, the nation’s leading prepaid card and reload network provider, to launch its next-generation Visa and MasterCard general purpose reloadable (GPR) prepaid products in 2009. The Green Dot strategy aligns customer and company objectives by strengthening customer relationships through feature-rich, low-cost GPR card products, with further value for loyal customers who make Green Dot their primary payment method.

After more than 12 months of research, development and testing, Green Dot reduced card fees and added a number of new free services, including online bill pay and ATM withdrawals, and no monthly fees for loyal customers. The retail card purchase price was cut in half to $4.95, bringing the cost of reloadable prepaid cards in line with most single-load gift card products. Additionally, Green Dot customers pay no reload fee for loads with direct deposit and they can earn a $10 credit to their card if they enroll in direct deposit. For frequent users, the monthly fee is waived when the card is used to make 30 purchases or more per month or is loaded with at least $1,000 during each monthly period.

With new state-of-the-art card packaging designs, Green Dot cards are the first GPR products to show the actual card through clear packaging, disclosing fees before the customer purchases it. Green Dot’s innovative design reduces inventory liability at retail by eliminating package tampering and streamlining the shelf life management of valid cards.

Cards are available at more than 50,000 retail locations in the United States, and customers can withdraw cash fee-free at more than 17,000 MoneyPass ATMs nationwide—a network larger than those available from many major banks.

Issued by Columbus Bank and Trust, Green Dot’s improved GPR card programs have enjoyed unmatched success since launch and have exceeded expectations. The relaunch generated increases in volume that more than offset the revenue impact of the new lower card fees. Green Dot is showing a double-digit increase in customers now qualifying for waived monthly fees based on frequency of use or loads; an additional double-digit increase of those who enjoy free ATM withdrawals. And, thousands of free online bill payments are being initiated each month.

Green Dot has demonstrated that GPR prepaid cards can provide a better and more affordable solution to consumers than traditional bank accounts.

Winners: H&R Block Emerald Card, H&R Block

H&R Block launched the H&R Block Emerald Prepaid MasterCard program in 2007 to provide its tax preparation customers—many without access to traditional banking services—a fast, secure and inexpensive way to receive tax-related funds. The program exceeded expectations in its very first year, with more than 2 million cards issued and $4.6 billion in refunds and loan proceeds loaded to H&R Block Emerald Cards.

With enhanced features and additional educational efforts, H&R Block engaged more consumers in the financial mainstream through the H&R Block Emerald Card during the 2008 tax season. The company seized the opportunity to leverage its workforce to educate consumers with intensive, wide-scale training of thousands of tax associates to communicate the value and benefits of the program. In conjunction with H&R Block Bank, enhanced features were added to the card (text messaging, bill payment and multiple reload channels) and new products could be accessed by the card (savings accounts and loans). At the end of the 2008 tax season, H&R Block had issued an additional 2.6 million new H&R Block Emerald Prepaid MasterCard cards, with personal loading of non-tax funds surpassing $1.2 billion since program inception.

During 2009, H&R Block issued 2.7 million additional Emerald cards, increased payroll direct deposit and network reloads, and surpassed prior years for total funding and total spend.

The H&R Block Emerald Prepaid Card program has had a profound effect on millions of consumers. With a vast number of H&R Block clients using the card for day-to-day financial transactions, the program has saved cardholders an estimated $76 million in check-cashing fees, offering average individual savings of more than $500 a year. The result has further strengthened H&R Block’s relationships with its customers by exposing them to traditional banking services that are sometimes taken for granted.

Winner: Walmart MoneyCard, Walmart, GE Capital and Green Dot Corporation

The Walmart MoneyCard showcases a new, smart way to manage your money with a reloadable Prepaid Visa Card, available to the 125 million consumers who walk through Walmart stores each week. The card reflects the retailer’s mantra—“Save Money, Live Better”—by providing a great product at an affordable price.

In February 2009, Walmart MoneyCard’s price was reduced, which, at the time of the announcement, Walmart predicted could save MoneyCard cardholders $50 million annually compared to similar cards. The pricing change included reducing the card purchase/activation price from $8.95 to $3 and establishing a $3 monthly fee and a $3 fee for reloads at Walmart. And, cardholders are able to reduce or avoid card-related fees by reloading via direct deposit or after cashing a paycheck at Walmart and getting cash back at a Walmart register.

In addition to being one of the most competitively priced prepaid card products available in the U.S. market, Walmart MoneyCard is one of the most convenient with six reload options—more than any other leading reloadable card program, according to Walmart.  

The card program is highlighted throughout Walmart’s customer experience, with permanent displays in 2,400 stores and complementary displays in all Walmart Money Centers and customer service departments. In addition, the Walmart MoneyCard has been integrated into seasonal tax marketing campaigns supported by television advertising, circular ads and in-store signage. A campaign that began in fall 2009 offered customers a free Walmart MoneyCard with the purchase of TurboTax tax preparation software at Walmart and encouraged existing cardholders to receive their refund seamlessly through direct deposit to their cards.

In addition, the Walmart MoneyCard program offers a Spanish-language product and a student/parent product, with two cards and one shared balance.

The Walmart MoneyCard, issued by GE Money Bank with additional services provided by Green Dot, continues to grow each year by tailoring its program to meet customer needs and by providing vision and leadership for the advancement of prepaid consumer solutions.

Outstanding New Entrant: MoneyWise Visa Prepaid Card, Western Union, Meta Payment Systems and i2c Inc.

The Western Union MoneyWise Visa Prepaid Card program provides consumers a feature-rich card with a friendly fee structure. The program was built for consumers with the ultimate goal of creating long-term customer relationships for Western Union.

By tying in Western Union money transfer services along with multiple load options, the MoneyWise prepaid card provides consumers with multiple unique features and benefits, including the ability to load a Western Union Money Transfer directly to the card. By providing multiple convenient ways to load money, the MoneyWise prepaid card has a strong consumer value proposition. In addition, Western Union also is using the MoneyWise card for its new Overnight Home Delivery service where Money Transfers are delivered directly to the recipient via FedEx.

Cardholders can add funds to their Western Union MoneyWise Cards in four different and convenient ways:

  • Load cash at more than 48,000 Western Union agent locations in the United States
  • Direct a Western Union Money Transfer directly to their MoneyWise card
  • Sign up for direct deposit
  • Load money online directly from a bank account

The Western Union MoneyWise card has one of the most competitive fee structures in the market. The program doesn’t charge fees for monthly maintenance, customer service, purchase transactions or overdrafts. The program has received rave reviews from consumers and membership levels are growing rapidly. Usage is strong and consumer feedback is extremely positive. With a 150-year history of connecting people when it matters most, Western Union continues to shape the way consumers receive and send funds worldwide.