True Link Financial Inc. has launched a prepaid Visa card for the elderly, with a set of customizable restrictions more commonly associated with cards designed for teens.
"Elderly people aren't well served by existing payments products," says Kai Stinchcombe, co-founder of True Link.
When a bank tells a caretaker to take away a senior's checkbook, "that's a horrible answer to the problem since it so severely reduces their independence," he says. True Link's alternative is a card that can be used only in circumstances that the senior's caretaker approves.
True Link allows restrictions such as prohibiting card-not-present transactions, charitable donations and specific merchants.
Charitable organizations are huge outlets for fraud since they are exempt from the do-not-call list and there aren't as many regulatory standards in place, says Stinchcombe.
Caretakers can also set parameters for how much the senior can spend per purchase. The company hasn't set up monthly spending limits because "the elderly individual spends money in a predictable way that the family knows," says Claire McDonnell, True Link's founder and chief product officer. But "because it's a prepaid card you can manage how much you load into the account and manage risk in that way."
True Link gets real-time transaction information from its processor i2c, allowing it to immediately decline a transaction that's over the maximum amount or send a text-message alert to prompt the caretaker to intervene.
"We want seniors to have the ability to live a full and vibrant life, while they and their families have the peace of mind with their financial security to know they aren't getting taken advantage of," McDonnell says.
True Link also has a database of illegitimate merchants that add hidden fees to purchases or start a recurring subscription without authorization. Stinchcombe says True Link has several interns that sift through junk mail, watch TV ads and click on Internet ads to find out which merchants could be problematic.
True Link's overall model bears a resemblance to products that focus on teens, providing parental controls to limit teen spending. These include SpendSmart (formerly BillMyParents), Virtual Piggy, PushCoin, FamZoo, Visa Buxx and others.
But there may be a generation gap in applying this model to senior spending, says Ben Jackson, a senior analyst at Mercator Advisory Group. "The card is targeted at an awfully specific group of people," he says.
The potential problems with this card are two-fold, Jackson says.
"Prepaid revenue comes from gathering interchange on each transaction so you need to have a large audience that will hang on to cards for a long time and make a lot of purchases on them," he says. "When you limit the purchases in some way or introduce friction into the payments environment it starts to pull against that volume."
The True Link prepaid card has a $20 annual fee that is waived for the first year. "We will make money from the annual fee, as well as additional premium services we'll roll out over time," says McDonnell.
The second issue, Jackson says, is "these elderly people are adults that have managed their financial lives all through this time and, just like driving, they are not going to want to give up that independence. The success of the program is going to require a lot of education of cardholders and caretakers."
I2c's transation monitoring service resembles some other options, such as BillGuards method of scanning for suspicious charges on an account linked to its service.
McDonnell says True Link is writing educational articles for families about scams, fraud and unwanted charges targeted towards senior citizens. It is forging partnerships with organizations that serve seniors, such as retirement homes, caregiver support groups and adult day cares, she says.
True Link is working with Sunrise Banks based in Minnesota to issue the cards. True Link's marketing executive, Chandra Chaterji, used to work at Visa and its operations executive, Debra Wohlrab, has been an executive at MasterCard and TSYS.