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NetSpend Corp., a provider of general purpose prepaid cards, today announced it has signed an agreement to buy Skylight Financial Inc., an Atlanta-based provider of payroll cards to employers. NetSpend decided to buy Skylight because the deal would give the Austin, Texas-based company a new way to reach unbanked and underbanked consumers, Dan Henry, NetSpend CEO, tells CardLine. NetSpend cardholders can have payroll funds deposited directly into their card accounts, but NetSpend does not offer cards through employers, he says. Buying Skylight enables the company to do so, Henry says. Skylight's management team, including CEO Kevin Lee, will stay in place, he says. The companies expect to close the deal in the third quarter. Henry declined to disclose the sale price or how many cards Skylight has outstanding. He did say Skylight cardholders would spend about $1 billion using their Skylight cards in 2008, and NetSpend customers would spend about $5 billion using their cards in 2008. Gwenn Bèzard, director of research at Boston-based Aite Group LLC, says the deal shows that the prepaid industry is consolidating. He says the NetSpend-Skylight deal represents horizontal integration within the industry in which companies are buying one another to increase the scale of their business. This stands in contrast to the First Data Corp. deal for Atlanta-based Interactive Communications International Inc. (InComm). That deal represents vertical integration, in which Greenwood Village, Colo.-based First Data wants to control more of the broad range of prepaid card business offerings to increase its margins, he says. "Now the consolidation is accelerating," Bèzard says. "That is probably the only generic statement you can make across the prepaid industry."

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