Synchology's Branded Payments Platform allows merchants to offer prepaid cards with their brands' loyalty and rewards programs.

By leveraging brands' existing customer relationships, the Chicago-based card marketer says it offers an alternative to the expensive and time-consuming task of creating a prepaid brand from scratch.

“It costs between $10 and $25 for an approved applicant in prepaid…and only about 25% of those approved fund their card,” says Doug Bobenhouse, CEO of Synchology.

Bobenhouse formulated the range after working in the prepaid industry for more than 10 years and hearing from other prepaid program managers. Before starting Synchology, Bobenhouse was the director of business development at Prepaid Solutions USA and managing director of prepaid at Total Card Inc.

“You see a lot of these [prepaid] companies create a brand and then disappear…or continue to raise venture capital money to sustain their models,” he says.

Acquisition in the prepaid market can be more expensive than other sectors because prepaid has a high turnover rate. In addition, open-loop programs require customers to go through a time-consuming and costly identification process, says Ben Jackson, a senior analyst at Mercator Advisory Group.

“Prepaid card customers often start with a temporary card and then receive a personalized card, so you have the card production and fulfillment costs on every account, and that starts to add up,” Jackson says. “With credit and debit cards, for example, there is typically one card issued and sent through the mail.”

While customer acquisition can be an expensive process, customer adoption can also be a difficult process for a startup. Consumer’s propensity for working with trusted brands and financial institutions is another reason Synchology decided to leverage existing merchant/consumer relationships.

Because of the expense of customer acquisition, many prepaid card programs charge hefty fees to sustain their models, which only adds to the negative connotation surrounding prepaid, Bobenhouse says.

In January, Synchology launched the Jump Visa Prepaid Debit Card as a direct-to-consumer product. The prepaid card was launched to showcase the company’s technology; Synchology is not promoting the product.

Synchology is now focusing on partnering with brands to deliver branded prepaid debit products. Its platform is white-labeled and can be customized to match brands. First Bank & Trust in South Dakota is Synchology’s issuing bank.

“Prepaid card programs depend on volume for profitability, so a white-label program can bring together several smaller programs under one larger umbrella to help achieve a portfolio that is large enough to make money,” says Jackson.

Many companies have created prepaid products to attract consumers that can’t get or don’t want credit products, typically those in the lower socioeconomic demographic, although this mindset is beginning to change.

Several companies have begun targeting prepaid at other demographics, including the elderly, such as True Link Financial’s prepaid card, and teens, such as The SpendSmart Payments Company’s Justin Bieber–endorsed prepaid card.

“There are a lot of prepaid card products out there that look and feel very similar to each other,” Bobenhouse says.

Synchology has developed a money management suite behind the prepaid product, similar to personal finance management platforms like Mint or Expensify so consumers can budget.

While the company doesn’t have any clients currently, it’s getting closer to making partnership announcements, Bobenhouse says.

Synchology has been speaking with companies in the insurance sector and brands working with a “credit-challenged audience,” Bobenhouse says. Whether because of income, age or just aversion, consumers have started turning back to cash and Synchology “wants to make that cash go farther by bringing reward value,” he says.

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