Why Wirecard's gig economy plan focuses on prepaid—for now
Wirecard has gained a foothold in using virtual prepaid cards to streamline corporate payments across business units, platforms and borders for companies with sprawling operations. Now the German company wants to do the same for more U.S. companies going global.
“We’ve seen that as U.S. companies grow by acquisition or expand into new areas, they find themselves running lots of different payment platforms, and virtual prepaid debit accounts can work well as the payment solution for a global, seamless integration,” said Deirdre Ives, managing director of Wirecard North America.
One example is using prepaid accounts to power payments to workers in the expanding gig economy. Moonrise, a U.S. startup, recently adopted Wirecard's offering to pay crews of temporary workers with prepaid cards.
As Wirecard nears next month's one-year anniversary of finalizing its acquisition of Citi’s North American prepaid card operation, the company is eyeing opportunities that would work along the same lines as the Moonrise integration, but on a global scale, Ives said.
“We’re both an acquirer and an issuer in Europe, which gives us interesting capabilities to do end-to-end processing for companies that collect and pay out funds through virtual prepaid cards, and we see opportunities to do the same thing in North America,” she said.
By containing payments solutions within a prepaid card account, Wirecard is going a different direction from the approach popularized by Uber and Lyft, in which drivers’ wages go directly into their bank accounts via direct debit services like Mastercard Send and Visa Direct. And Ives said there’s a good reason for it.
“We think Mastercard Send and Visa Direct are great adjunct methods of sending money from person-to-person, but direct debit payments still have some nuances and limitations for disbursements that haven’t been fully addressed,” Ives said.
For example, prepaid cards can meet broader requirements for corporate disbursements where direct debit isn’t suitable, and for recipients who may not have a debit card, according to Ives.
“With prepaid, there’s very broad transparency that makes it easy to trace and recall payments, which adds flexibility and covers a lot of situations for buyers and sellers,” she said.
Wirecard hasn’t ruled out using direct debit to deliver disbursements to consumers. “We have a project in line [with direct debit] that will available later this year,” Ives said.
As Wirecard builds its North American business, insurance companies that make payments to businesses and consumers also are prime prospects, she said.
“Checks still comprise millions of insurance reimbursements sent within the U.S., and not only are checks prone to fraud, but it’s getting harder for consumers to cash checks so it takes longer for these payments to clear, adding to the overall expense,” Ives said.
As a Mastercard prepaid card issuer that also operates as a bank, Wirecard supports two-way payments for business customers in the international travel industry. It combines this service with other features like data analysis to drive strategic marketing and loyalty in industry sectors like entertainment.
“Lots of merchant categories could benefit from consolidating payments to and from sales agents on one platform,” Ives said, pointing to the rise of online businesses that sell goods on a wholesale basis to independent agents through a website, and reimburse them for goods sold on the retail level.
Wirecard’s ability to function as both an issuer and acquirer enables customized disbursement programs ranging from reimbursements to rebates and rewards, is a positive, but not entirely unique.
“Generally I think Wirecard is using its issuing and acquiring assets creatively to drive payments innovation,” said Zil Bareisis, a senior analyst with Celent, who noted that traditional prepaid cards are a good starting point for business solutions and the ability to instantly issue and fund prepaid accounts could open up many new use cases.
Wirecard says its innovations don’t hinge on the payment mechanism.
“It’s the idea of having multiple pieces of the value chain and capturing that for our clients, when combined with API development and integration, that’s driving new payments use cases,” Ives said.