BillMyParents Inc. made a strong course correction when it chose to abandon its inventive online parent-billing payment system for a more conventional product: plastic cards.

The transition to a new product, which took place in 2010, has gone well, it says. Although the San Diego-based company's original plan was to disrupt online payments with a system that allowed parents to approve or veto teens' online purchases, BillMyParents found it more appealing–and potentially more lucrative–to join the growing prepaid card space instead (see story).

The amount of funds loaded nationwide to open-loop reloadable prepaid card accounts grew 40% in 2011, to an estimated $57.2 billion, according to Mercator Advisory Group. This is nearly triple the amount that was loaded to prepaid card accounts in 2008.

"We thought we could help a lot more people in the teen-spending area by going with a broader [option] that more people could take advantage of in a broader age range," says Michael McCoy, BillMyParents chairman and chief executive. McCoy joined the company in September 2011.

The BillMyParents prepaid card, called SpendSmart, maintains the premise of parental involvement in teen spending. Parents get immediate notices of their teens' purchases and can lock the card's spending ability if they see something they do not like. Last summer, the company launched a marketing campaign with Tremor, the Procter & Gamble Co.-owned marketing firm that enables moms to evaluate new products online through its website (see story).

Parents also control how much cash is loaded to the card account. It can get regular loads for allowance as well as one-time loads for emergencies.

The card has a $3.95 monthly fee, a $2.95 fee for emergency loads and a $1.50 fee for ATM withdrawals, among other fees. Parents have the option to disable ATM access, and the card cannot be used at liquor stores and casinos.

A key advantage the card has over BillMyParents' earlier payment system is that, as a regular MasterCard-branded prepaid card, it does not require anything special of the merchants that accept it. The original online-focused BillMyParents payment system required merchants to add a button to their websites for teens to click.

"We have refocused from a button … to a card that can go out and touch millions of teens," says McCoy.

Though BillMyParents is focused on its prepaid card today, it may revive its online payment system in the future, McCoy says. It might also license the online payment technology to a third party, he says, and at least one company has already offered to buy a license

"As we build out a broader suite of tools and products for families that are focused on responsible teen spending, that [online payment tool] could be part of a family of products to offer," he says.

Some of the prepaid card's features are specific to BillMyParents.

"I have not seen a bank account that does" instant notification of purchases, says Ben Jackson, senior analyst at Mercator Advisory Group.

"For parents who are concerned about how their children are spending money, this could be the feature that puts BillMyParents out ahead of the competition," he says.

Still, creative teens may sidestep some of the card's protections by, for example, using the card for ATM withdrawals and then spending the cash anonymously, Jackson says.

If the SpendSmart product is used mainly as an ATM card, "that could make the card more expensive to operate for the company and less appealing to parents," Jackson says.

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