Category Archives: Prepaid

Stop Discounting Premium Products

Premium product discounting usually occurs when a lift in sales is needed during a specific period of time. Companies sacrifice margin in order to appeal to a larger audience with the hope of a sudden and predictable surge in revenue.  These discounts vary from a percentage off the list price to a flat dollar amount reduction.

Generally speaking, discounting a high-end product can result in an immediate increase in demand.  That said, marketing professionals continue to profess that the more people pay, the more value they credit to their purchase. However, when premium products are discounted, consumers question the value of the product.  In addition, the value of a powerful brand is the ability to demand, and consistently obtain higher prices than competitors in the marketplace.  Discounting also conditions the consumer to delay their purchase and wait for the impending sale. 

A viable alternative to price discounting continues to be the utilization of a prepaid card (plastic or virtual) to create the motivation for the targeted consumer to purchase immediately.

The benefits of prepaid are as follows:

• Immediate program revenue lift – prepaid stimulates demand and improves margin

Predictable program financials with an ability to maximize revenue recognition

• Return of incremental customer monies – prepaid allows for a unique opportunity for seamless cross-selling and up-selling ancillary products

• Continuous engagement of end customer through card messaging (IVR, Text, Email and Web)

• Ability to gain consent from the consumer in order to continue to interact with them moving into the future

• Reinforcement of brand with ability to customize the card and corresponding collateral

• Detailed spend data that helps create a more accurate profile of the end customer

Historically, rebates were utilized to stimulate revenue, with the underlying hope that the consumer would avoid the involved process of submitting their rebate and the rebate dollars would return to the sponsor company.  That is not the objective any longer.  The real value the rebate provides is in the ability to immediately engage the consumer with the end goal of creating a loyal, persistent relationship.  In the case of a consumer rebate, prepaid becomes a valuable financial instrument that provides an organization the ability to ensure their buyer becomes a viable, long-term asset.

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Ensuring Cardholder Funds are Protected

As corporations consider utilizing prepaid as a tool to increase revenue and/or decrease costs , it is imperative that they ensure the dollars sent for loading go directly to, and are protected by the issuing bank.   Here are some fundamental things to consider:

  • FDIC Coverage: All corporate monies need to be deposited into an account that qualifies for FDIC pass-through insurance.  In the depository institution, monies shall be insured on a “pass-through” basis in the amount of $250,000 for the interest of each cardholder.
  • Accounting and Recordkeeping: Essential to the issuing bank’s operation, and in response to regulatory requirements, detailed bookkeeping of debit and credit entries to all accounts should be maintained on a daily basis.  This daily reconciliation of accounts is critical information for the regulators with respect to matters such as the bank’s overall financial soundness and their cash position with the Federal Reserve Bank.   The debits/credits are applied to the set-up account based on file feeds (including prefunding) and are determined by number of cards issued, card balances and card transactions.
  • Access: The set-up account can only be accessed via a systematic, file-feed process.   There can be no manual ability to directly make debits or credits.   All debits and credits must be traceable, and subject to audit reviews. 

One final note: once payment is made and funds are processed, the monies become the property of the individual cardholder, and cannot be accessed by anyone but the cardholder. 

Prepaid, when implemented correctly, is a powerful financial instrument that can be levered to help an organization meet its primary business objectives.  Companies that intend to lever prepaid must complete the necessary due diligence in order to guarantee their monies are protected.

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Student Refund Management – What to Consider

Students enrolled in academic institutions that receive some type of financial aid, many times end up being owed a refund by the school after their tuition invoice is settled.  The bursar’s office is usually charged with determining what dollars are owed to which students.  Historically, the next step in the process entails manually processing then sending out checks to each qualified student.  Not only is the process slow and cumbersome, it is costly to both the institution and the student.  Industry data suggest that is costs almost $40 to deliver a check to a student.  Once delivered, the student has to find a place to cash the check.  Many times there is considerable fee associated with providing them the cash. 

The solution currently being adopted by many colleges and universities encourages the student to accept some form of electronic payment.  Through an integrated web interface (usually during the enrollment process), the student is prompted to select how they want to receive their refund:

MasterCard/Visa Prepaid Card

  • Student receives a MasterCard/Visa debit card and all refunds are loaded to the card
  • The student can make purchases anywhere MasterCard/Visa debit is accepted in store, online or by phone
  • Deposits are posted to MasterCard/Visa debit card a day after award is disbursed to Student Account
  • No delay while waiting for the mail
  • No bank account required or trip to the bank to cash a check
  • Surcharge-free cash withdrawals at specific ATMs locations (including on campus)  
  • Coverage by the card’s inherent fraud protection feature in the event the card is ever lost or stolen
  • Free online account management 
  • Flexible, convenient and safe access to a student’s funds

Electronic Funds Transfer (EFT)

  • Student receive an electronic funds transfer to their checking or savings account
  • Deposits are posted to checking or savings account a day after award is disbursed to Student Account
  • No delay while waiting for the mail
  • Free online account management 
  • Flexible, convenient and safe access to your funds

The fundamental issue associated with this paradigm shift involves ensuring compliance with Title IV and other legislation that regulates how a refund can be disbursed.  Title IV Funds refers to the federal financial aid programs authorized under the Higher Education Act of 1965 (as amended) and includes the following programs: Unsubsidized Federal Stafford Loan, Subsidized Federal Stafford Loan, Federal Perkins Loan, Federal PLUS Loan, Federal Pell Grant, Federal Academic Competitiveness Grant, Federal SMART Grant, Federal Supplemental Educational Opportunity Grant and Federal TEACH Grant.  The Department of Education’s guidance on this topic suggests that a check must be a method of disbursement made available to the unbanked student (or a student that fails to provide their bank routing/transit information).  If that student does not select a form of payment, the default method of payment must be a check.  In addition, a school must adopt reasonable safeguards and obtain authorization from the student (e-signature is fine) before an electronic payment can be made.   

Other issues associated with moving to an electronic form of payment involve the predatory fees some vendors charge for providing the service.  Along with severely punitive insufficient fund fees, some of this companies charge students incredibly high “abandonment account fees” if the monies remain unused in their assigned account.

The obvious economics suggest that academic institutions must move their refund disbursement process to an electronic form of payment.  That said schools must carefully evaluate all platform options before aligning with a potential provider.   The institution must be certain that the ultimate solution deployed considers what’s best for the school and the matriculating student. 

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Create Behavior Changing Impact

Through innovative and targeted campaigns, professional marketers create immediate demand from their intended audience.    Appropriate and timely messaging, in conjunction with some type motivator (rebate), can turn apathetic prospects into energetic buyers. 

Many times however, there is an unavoidable lag between the demand creation and the actionable next step….the purchase.  Through the utilization of a defined online strategy, marketers are able to minimize the time between consumer interest and execution.  

Marketers who employ an effective eCurrency (a virtual prepaid Visa or MasterCard) strategy are able to:

  • Immediately and seamlessly reward the consumer for following the indented buying behavior. 
  • Steer the audience to a predefined purchase. 
  • Strengthen brand equity at the consumer and product level.
  • Manage costs by moving to an electronic form of payment (eliminating paper and plastic).

In addition to these business benefits, the consumer experience has evolved at the transaction level.  The recipient is now able to add dollars (via a credit card) to their virtual Visa/MasterCard so they can perform online purchases with ease.  The economics and empirical data suggest that professional marketers should consider adding an eCurrency option to their available toolkit.

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Using Data to Generate Revenue

Business intelligence continues to be an area of high priority for organizations that are looking to improve their decision making on the data collected from processes, people and applications.  Understanding what your customers want is a fundamental principle of marketing. This principle is simple in theory, but challenging to put into practice. 

It is difficult for marketers to know what is on the customer’s mind today, then accurately anticipate what the customer may need/want tomorrow. The challenge doesn’t stem from lack of customer data.  The fact is, customers and prospects are giving us information about themselves all the time.  Through every purchase, response, event, transaction and web site hit, consumers reveal something about themselves.   The challenge is integrating customer intelligence into a powerful business system.

Consumer spend analytics, derived from prepaid card awards, enables strategic decision making, opportunity assessment and revenue prioritization.  Transaction processing data provides real insight for corporate leaders in marketing, product development, consumer experience, customer relationship and advertising management.  These detailed reports outline:

  • Where in the world your customers are spending their monies.
  • What they are spending their monies on.
  • How much they are spending and in what stores.


Synthesized with demographic data, static reports are transformed into a true decision support system for an organization.  A Colorado company called Clear Peak, has been able to harness this powerful solution, and offer their clients a true competitive advantage. 

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