The 'Gig Economy' Is a Gold Rush for Prepaid

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As more mobile apps and businesses push plastic payments to the background, they also give prepaid card accounts a chance to reclaim the spotlight.

Companies like Uber and Lyft have given life to the "gig economy," creating "millions of 1099 workers in this country" who need to receive payments from multiple sources, often as a supplement to their main source of income, said Chuck Harris, president of prepaid card marketer NetSpend, a unit of the payment processor Total System Services Inc.

From the third quarter to the fourth quarter of 2015, "we saw a 160% jump in loads coming from companies out of this gig economy," said Harris, also a senior executive vice president at the Columbus, Ga.-based TSYS, during the company's analyst day in New York this week.

"One in five of our direct deposit loads are coming from secondary sources of income," Harris said, and many of these cardholders have needs that are just as complex as those operating a traditional small business. "We see a special role in prepaid in solving problems as the gig economy continues to gain traction in the world we live in today," he said.

NetSpend isn't the only prepaid card company that stands to benefit from this trend. Its rival Green Dot Corp. works with Uber to quickly deliver payments to drivers. The Green Dot pact, announced in March, allows Uber to pay drivers in real time rather than wait for a weekly check.

TSYS also plans to build out the capabilities of its mainstream NetSpend product. It will launch a checking feature this summer, which Harris said won't be a traditional bank check product but will play to the strengths of the prepaid market, such as distribution through retail partners.

NetSpend is planning to benefit from a broader strategy at TSYS to revamp the use of technology companywide.

"We're making major investments to streamline our core operations as well as our internal processes," said Patty Watson, who became senior EVP and chief information officer at TSYS in September. PaymentsSource recognized Watson as one of 2016's Most Influential Women in Payments.

TSYS plans to use of cloud-based technology to speed product deployments and reduce the demands of maintenance, Watson said.

"We found consistent needs across our segments such as digital engagement, automation, developer-friendly APIs and we're in the process of aligning our talent to address those," she said. "We believe there are new and unique ways we can leverage our merchant, prepaid and issuing businesses that haven't been envisioned yet."

Prepaid is well-suited to benefit from these changes because the product is flexible enough to suit nearly any audience, Harris said. Though prepaid cards are often thought of as tools for students and the unbanked, they also pair naturally with mobile apps and new business models, he said.

"Prepaid cards have a fantastic opportunity here," Harris said. "It is one of the few financial products that anybody can get. You don't need a bank account, you don't need a credit score — you must not be a money launderer or terrorist to obtain one, but that seems to be a fairly low bar — and it leverages the rails of MasterCard and Visa, so it has trust and confidence and universal acceptance."

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