Sunrise Banks, based in Saint Paul, Minn., has never shied away from issuing an experimental prepaid card in its mission to help the underbanked find financial stability.
Sunrise Banks has more than 100 different prepaid card programs with about 20 different program managers. Its offerings include the True Link Prepaid Visa card for seniors, the MyPlash Prepaid MasterCard for teens, and a combined debit and government ID card for the city of Oakland, Calif.
"We'd like to see any program succeed but that's not the only determination," says Joan Herman, senior vice president of Sunrise Banks. "Because we're a mission-driven bank it's not all about how much we can make on [products]."
Sunrise Banks comprises community development financial institutions (CDFI), which receive grants and additional funds from private foundations and the CDFI Fund, created by the U.S. Department of Treasury.
Sunrise considers the Oakland ID card to be more experimental than many of its other offerings.
"The jury is still out in my mind whether [the Oakland card] will be successful as a prepaid card," Herman says. "It's definitely going to be successful as an ID card to meet the city's needs."
The bank did a lot of research and listened to many advocates for why a dual-purpose card might benefit certain populations in the Oakland area.
All card programs go through a risk-and-growth analysis, Herman says. "We have to shut down some programs for a number of reasons it's just a decision we make as we go through the growth process," she says.
The bank prohibits program managers from charging high fees or fees for certain activities. Financial success is not a vital factor in Sunrise's decision to launch a product, "but we wouldn't want to offer programs that there's no opportunity for success," Herman says.
The new True Link card meets a need that isn't met with other financial services products, she says. "True Link is geared towards seniors at first but the product concept can be expanded to others that need help monitoring spend."
The True Link card lets a caretaker set limitations on senior spending. These features are applicable to other audiences, and are common to teen spending products such as Sunrise's MyPlash card.
Sunrise "has a very realistic view [that] to create a sustainable portfolio and a sustainable bank they need to have things that make profit as well as things that are helpful to the community," says Ben Jackson, a senior analyst at Mercator Advisory Group.
CDFIs such as Sunrise "will be judged from a regulatory point of view on both a safety and soundness basis and also on the idea that they'll do things for low-income people and to revitalize neighborhoods," he says.
While traditional banks charge hefty fees for products that target low-income, risky customers, CDFIs know that the majority of the customers will use the services in a legitimate manner so they take the risk to offer products and services at lower fees, Jackson says.
Though the Kardashian Kard, endorsed by TV's Kardashian sisters, had average fees, it took heat for charging six to 12 months' worth of fees up-front. Ultimately, the bank sold only 16 Kardashian Kards before the program shut down.
"There are some products that need to be profitable in the very conventional sense," he says. "The approach for the Kardashian Kard was one" that used a conventional revenue model that could, in turn, fund less profitable products.