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First Data Corp.'s recent decision to enable its Star electronic funds transfer network to double as a reload network for Star-branded prepaid debit cards indicates how different segments of the payments industry view the maturing prepaid card market, observers say. "The opportunities surrounding reloadable general-purpose cards are getting very real and, as a result, First Data looks at that and says 'we need a piece of it,'" says Tim Sloane, director of Mercator Advisory Group's prepaid advisory service. On Wednesday, Atlanta-based First Data announced a system that will enable cardholders to reload Star-branded prepaid cards at participating ATM and point-of-sale locations. The system also enables cardholders to activate and initially load their cards and conduct split-tender purchases at the point of sale. First Data is in negotiations with Star-affiliated financial institutions and merchant acquirers to add the service, according to Julie Saville, Star vice president of product development. "We have all the infrastructure in place, and now we're ready to launch." The service will give Star-branded card users the option to add funds at ATMs and at checkout lanes using cash, a debit card and even a paycheck, Saville says. How funds are added at an ATM will depend on how the deployer programs the machine, she adds. "We're trying to get on the ground floor of being the new functionality for ATMs," Seville says. For merchant acquirers, Star is positioning the service as something they can add easily to an existing POS system. Prepaid card issuers, however, have expressed the most interest in the reload network, Saville says. They hope adding different features and functions to the card will reduce attrition, and Star believes it can be another differentiating option for financial institutions, she adds. Star's status as a reload network may force other EFT networks to examine a similar strategy, says Brian Riley, research director in the bankcards practice at TowerGroup Inc. "It's certainly something that is going to create a market challenge, and certainly other players are going to think about how they respond," he says.

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