In a move to get into the approximately $40 billion corporate prepaid market, Blackhawk Network is purchasing InteliSpend Prepaid Solutions.

InteliSpend offers prepaid programs to businesses for employee rewards, expense management, promotional programs, sales and wellness incentives. The companies expect the acquisition to close by Nov. 8.

“The acquisition gives Blackhawk and InteliSpend tremendous growth opportunities,” says Talbott Roche, president of Blackhawk. This “is an entry into the adjacent corporate prepaid space…that’s growing from a revenue and profit standpoint.”

Blackhawk plans to bring its digital products to InteliSpend’s 1,700 “blue chip” corporate customers, which will likely adopt digital prepaid faster than the consumer market, Roche says.

Because there’s still a stigma on digital gifting—consumers much prefer giving a physical gift over a virtual one—physical cards will remain a large part of Blackhawk’s business, she says. But for corporate customers, e-gifting is more efficient and less expensive, she says.

“Blackhawk is looking ahead to a time when plastic cards may not be the dominant form factor in prepaid distribution and finding new ways to grow their business,” says Ben Jackson, a senior analyst at Mercator Advisory Group.

Last year, Blackhawk launched its Gift Card Mall in the digital world, creating an online e-gift network for retailers and banks. In June, Blackhawk began working with Monitise PLC to allow consumers to purchase gift cards on their mobile device through their financial institution’s mobile banking site.

Blackhawk adds features to its e-gift products that aren’t accessible on physical gift cards, says Roche. For example, consumers can check a gift’s balance and merchants can send offers and reminders, she says.

And when Blackhawk adds digital gifts to ecommerce sites, the merchant sees additional sales, says Roche. The digital gifting feature doesn’t just replace physical gift sales, she adds.

Blackhawk’s strategy echoes that of InComm, the prepaid and transaction services company, which is also diversifying its product set to brace itself for the cardless future, says Jackson. Both companies are moving away from a "traditional model of selling plastic cards to people through third party retail," and are shifting toward a business-to-business model, he says.

InComm has been adding services since the beginning of the year to reduce its reliance on the plastic card market. In January, InComm acquired Giftango Corp. to expand its e-gifting capabilities. The company also launched a program to allow consumers to buy digital gift cards in brick-and-mortar retail locations

Plus InComm has helped both PayPal Inc. and American Express Co. expand their cash loading capabilities.

InteliSpend, with Blackhawk’s existing digital and international businesses, will form the core of the company’s new B2B unit. Blackhawk will continue to look for companies to acquire in the corporate space and also to expand internationally, says Roche. 

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