Celebrity-endorsed prepaid cards have become formidable rivals to banks, and it's not just because of their star power. Behind every big celeb is a seasoned banker.
At UniRush, that banker is Rob Rosenblatt, who left a job handling loyalty services at JPMorgan Chase & Co. last year to work for the hip-hop mogul Russell Simmons. Rival products such as Suze Orman's Approved Card and even the failed Kardashian Kard were launched with the support of bankers.
Rosenblatt, a Harvard Business School grad who spent roughly two decades crafting rewards programs at various issuers, said his move from Chase reflected the energy in the room during his interview to become UniRush's first chief executive. Rosenblatt jumped despite UniRush's small size and a reputation that has suffered partly because of Simmons' fame.
It is necessary to have faith in the celebrity "in any situation in which you take a role in a company that was created by an icon," says Rosenblatt, 52. "You are joining a company that already has a very strong way of doing business."
Rosenblatt isn't straying as far from his roots as it might seem. A company such as UniRush has "lots of synergies and overlaps" with traditional banking, he says.
"There is very strong overlap between … [Chase's Freedom card] customer base and our customer base in terms of their needs and the way they plan their lives," Rosenblatt says. "And it has influenced my views on how we developed Rush Goals and how we treat the whole category."
Simmons' reputation has been a mixed blessing. It has certainly boosted the prominence of the RushCard, but it also has led to controversy. Simmons, who is not shy about his wealth, has been called a hypocrite and a "wolf in sheep's clothing" by critics for marketing his card to poorer people.
UniRush has strived to counter this negative perception with fee reductions, the most recent of which took place in March (see story).
UniRush's peers have faced similar backlash. When personal finance guru Suze Orman announced her Approved Card in January, she was harshly criticized for her card's fees (see story).
RedWage, which administrates the Approved Card, is run by payments industry veterans.
Sean O'Toole, RedWage's chief executive officer, used to work for Western Union and American Express Co., according to RedWage's website. Tom McDermott, RedWage's executive vice president of marketing and business development, used to work at Capital One, the site says. (McDermott said RedWage executives would not agree to an interview.)
Even the infamous and short-lived Kardashian Kard had a bank behind it.
"I've made every mistake there is in my journey in prepaid, and we were the bank that issued the Kardashian Kard … I'd love to go back in time," David Reiling, the CEO of Sunrise Community Banks, said at a panel discussion last year (see story).
(Sunrise would not make an executive available for an interview for this story, citing scheduling issues. Nancy Torosian, the chief operating officer of Revenue Resource Group, the marketer behind the Kard, did not respond to an interview request made by phone and email.)
The Kardashian Kard required customers to pay six months to a year's worth of fees up front, which made it seem expensive even though its $7.95 monthly fee was in line with what its rivals charged (see story).
Reiling spoke at a panel at last year's Underbanked Financial Services Forum, a conference jointly sponsored by American Banker and the Center for Financial Services Innovation.
"The market did work very efficiently," he said last year. The program sold just 16 Kards and it was shut down altogether two weeks after its launch.
Prepaid cards are fighting a bad reputation, and UniRush's offerings have clearly improved since Rosenblatt signed on, analysts say.
Rosenblatt plays down his role in implementing those improvements.
Besides cutting RushCard's fees, UniRush added a rebate program for customers who maintain an averaged balance of at least $500 across all accounts. UniRush also now offers a discount to its monthly fee for customers who have their paychecks directly deposited to their prepaid card accounts.
"I can see him cleaning up the fees with the Card Act and really realizing that if you can do this business by the rules and don't piss off the market, you can have a really great business and be compliant on everything," says Brian Riley, a senior research director in the bank cards practice at CEB TowerGroup.
"They are certainly responding to competition in the market," says Ben Jackson, a senior analyst in the prepaid advisory service at Mercator Advisory Group. "There seems to be an emphasis on being a low-cost provider, and I think they are responding to some of that pressure."
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