Can TSYS reboot Netspend's prepaid card for deposit accounts?
The use cases for prepaid cards are diverse, but reloadable debit cards are rapidly evolving as major players like Green Dot and Netspend morph these products closer to more versatile digital banking products.
Green Dot’s revenue soared during the most recent quarter after repositioning its core product as a mobile banking concept instead of a prepaid card, and Netspend is starting down a similar path.
Just as Green Dot leveraged partnerships with the likes of Uber and Apple to expand its reach, Netspend also is looking to its retail partners including Kroger, CVS and Kohl’s for new digital payment use cases, according to longtime TSYS executive Kelley Knutson, who was named president of Netspend early this year.
“The infrastructure of prepaid is nicely structured for the next evolution of digital payments, including P2P money transfers and very specific spending in ecosystems associated with brands,” Knutson said.
A generic example is a retailer offering consumers a digital account to store and spend funds associated with loyalty points or merchandise returns.
“We can supply a retailer with a white-label rewards program enabling users to spend funds they accumulate from that store—through shopping, rewards, disbursements or reloads—at that same merchant,” Knutson said.
The goal is for consumers to use Netspend-powered digital wallets for everyday expenses including groceries, food and apparel using funds stored within merchants’ apps.
“For our core prepaid customers, we’re already their DDA alternative and that’s where we see our next evolution,” Knutson said.
Through its TSYS parent, Netspend could reach several different channels with digital wallets. Dozens of major retailers currently carry its Netspend’s prepaid cards. On the commercial side, Netspend provides electronic payroll services for several companies that could use its services for paying gig-economy workers and disbursements, according to Knutson.
Using API technology already built into its prepaid card platform, Netspend can integrate with marketers and corporations with digital payment products as the company puts less emphasis on prepaid cards, Knutson said.
This isn’t a surprising direction for Netspend to go, given new prepaid card regulations going into effect next year, said Ben Jackson, chief operating officer of the Network Branded Prepaid Card Association, which will rebrand itself as the Innovative Payments Association in 2019.
The CFBP’s final rule for prepaid cards, effective in April 2019, provides more flexibility for prepaid card issuers to operate as digital wallets linked to credit and debit cards, which is opening up new marketing channels for prepaid issuers, according to Jackson.
“Account structure will no longer determine whether something is considered a prepaid card, blurring the lines between prepaid accounts and DDA accounts, and that’s giving prepaid card issuers an opening to create products with DDA features on prepaid card platforms,” he said.
Netspend currently is piloting some DDA-like products with retailers Knutson declined to disclose, with the goal of rolling them out broadly next year.
“We believe strongly that consumers are segmenting their purchases, setting funds aside for specific types of purchases, and serving this type of use case is where we want to move,” Knutson said.
But there will likely be plenty of competition from other prepaid card issuers going in the same direction. “You’re going to see a lot more of this kind of diversification with prepaid card processors as capabilities evolve,” Jackson noted.