Choosing a Prepaid Processor in an Evolving Market:

A Study on Issuer and Program Manager Needs

Conducted by Javelin Strategy & Research November 2008

2008 Javelin Strategy & Research All Rights Reserved

TableofContents

Overview................................................................................................................................................3 ExecutiveSummary................................................................................................................................4 WhatWillCharacterizetheEvolutionofPrepaid?.................................................................................6 TheComponentsofaPrepaidProcessingProgram...............................................................................9 DispellingMythsAboutPrepaidProcessors........................................................................................14 SummaryandWrapupKeyConsiderationsforaPrepaidProcessingRelationship..........................22

Asaleadingindependentproviderofquantitativeandqualitativeresearchfocusedexclusivelyonfinancial servicestopics,Javelinusesrigorousstatisticalmethodologiestoconductindepthprimaryresearchstudiesthat pinpointdynamicrisksandopportunities.

ChoosingaPrepaidProcessorinanEvolvingMarket:AStudyonIssuerandProgramManagerNeedsNovember2008

Overview
Prepaidcardissuancehasundergoneanexplosioninrecentyears,andallindicationsarethatthistrend willcontinue.Prepaidissuerswhethernewtothemarketplaceorexperiencinggrowthbeyondthe capacityoftheircurrentprocessormustcarefullyconsidertheroleandthecapabilitiesofthat processortorealizethefullpotentialoftheirprepaidprogram. Theprocessordecisionisintegraltothesuccessoftheprepaidprogram.Currentlymanyofthe questionsthatissuersshouldproactivelyposegounasked,leavingtheissuerinanuntenablesituation withinmonthsofimplementation.Prepaidissuersneedtoclarifyallthequestionsthattheyshouldask priortochoosingaprocessor,andmustperformacomplete,proactiveneedsanalysisforprepaid processingservices. Manyissuershavemademistakesintheirearlyiterationsofprepaidprograms,selectingprocessorsthat woefullyneglectoneaspectoranotheroftheoverallprepaidarena.Thiscaninclude,butisnotlimited tothefollowing: Processorswhosefocusononeproductleavesissuersunableexpand. Processorswhounderdeliveronpromisesofscalabilityandreliability,leavingissuersunableto growtheprogramtothefullestpotential,or Processorswhocannotassistprogrammanagersonaconsultativelevel,leavingallofthe innovationanddevelopmenttotheprogrammanagerthemselves,andthusprovingunableto fullycapitalizeontrendsintheprepaidmarketplace. Eachoftheaboveissuescanleaveaprepaidprograminlimbo,withthepainofmigratingoffa processingplatformworsethanthestatusquo,regardlessofhowunacceptabletheprocessingprovider andplatformmaybe.Theintentofthispaperistohelp issuersavoidthatpainandassistprepaidprogrammanagers ingainingadeeperlevelofunderstandingofwhattheymust seekfromtheirprepaidprocessor.

ChoosingaPrepaidProcessorinanEvolvingMarket:AStudyonIssuerandProgramManagerNeedsNovember2008

ExecutiveSummary
Companiesmakingimportantbusinessdecisionstoenterand/orexpandtheirprepaidcardpresence mustbepreparedtomakecriticalprocessingandoperationaldecisions.Thispaperwillhelpyouaskthe toughquestionstogetthemostoutofrelationshipsyouhavewithprocessorsandensurefull optimizationfromanyprepaidprogramyoulaunch,manageandgrow.Whetheryouhavean establishedprepaidissuanceprogram,arelookingtoexpandorpotentiallymigratetoanewplatform, orareinthebeginningstagesofdecisionmakingregardingaprepaidplatform,thisinformationcan serveasfurtherguidance. Companieslookingtoentertheprepaidarenaneedtolookattheholisticcapabilitiesofprocessing solutions,understandingthevariouscomponentsofaneffectiveprepaidprogramoperationandhow eachcomponentisimplementedandmanaged.Thefirstsectionofthispaperisintendedtoprovidean overviewofeachcomponent,andanunderstandingofhowcomponentsfitintothelargerpicturefor prepaidprocessingplatformchoices. Establishingarelationshipwithaprocessoranddeterminingwhethertooutsourceallorsomeprogram operationscomponentsisadecisionwithmultiplecriteria.Issuersandprogrammanagersthosewho issuecardsdirectlyorindirectlythrougha3rdpartyshouldconsiderthefollowingitemsasparamount fortheviabilityofasolidoperation: Productbreadthandevolutioncapabilities:Cantheprepaidprocessorhelpexpandbeyonda singleproductoffering,providingthesupportandfunctionalityneededforawiderarrayof prepaidproducts? Componentsorclientdefinedattributesoftheprogram:Istheprocessorprovidingapoint solutionoraholisticprocessingplatform? Processingenginereliability:Willthesystemworkwhenneeded? Scalabilityoftheprocessingsystemcantheprocessorgrowastransactionvolumeand correspondingsupportservicesneedsgrow?

ChoosingaPrepaidProcessorinanEvolvingMarket:AStudyonIssuerandProgramManagerNeedsNovember2008

ExecutiveSummary
Theexperienceoftheprocessorisakeyfactorinthisequation.Prepaidissuersandprogrammanagers mustdeterminethelevelofexperiencethattheprocessormayhavenotonlyintransactionprocessing itself,butalsoinmanagingeverythingfromtechnologytoexceptionmanagement,tocompliance,risk andfraudmanagement.Whatarethefactorsthatmaketheprocessorsuperior,orinferiorinthese facets? Andfinally,therelationshipmanagementcomponentsoftheprepaidprocessingchoicecannotbe overlookedordeemphasized.Theprepaidprocessoristheconduitfortheissuerorprogrammanager tothetrendsandevolutionoftheprepaidarena.Successorattheveryleastthedegreeofsuccess realizedbyanissuercanbelargelydependentontheprepaidprocessorsabilitytorecognizetrends andworkwiththeissuertoexpandandmanagetheprogram. Issuersandprogrammanagersmustthereforeanalyzetheclientserviceandconsultativecapabilitiesof theprepaidprocessor.Howwelldoestheprocessorunderstandthemarket?Thetrends?Clientneeds? Howwellcantheprepaidprocessorenableitsclientstocapitalizeonthesetrendsandtrulydrivegrowth throughtheprepaidplatformandproductset?

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WhatWillCharacterizetheEvolutionof Prepaid?
Asconsumerneedsevolveandtechnologydrivesinnovationintheprepaidsegment,processorsmustbe flexibleandinnovativeenoughtofullyrespond,butpreferablydriveproductdesign,implementation andperformancefortheirprepaidissuerclients.InthefuturePrepaidwillcontinuetorequireproduct diversityandflexibility,buttherapidchangealsorequiresabusinesspartnerwithknowhow,proven experience,understandingofthemarketplace,andaflexibleplatformwithcommonvalueaddedtools, suchasfraudprotectionandinformationmanagementsolutions.Thiswillallowforefficient managementofprogramsthatgrowasclientneedsgrow.Providersofpointsolutionsthatfocusonone particularproductormarketarenotwellpositionedtoevolveasprepaidevolves.Issuersmustremain vigilantastothecapabilitiesoftheirprocessorstoconsistentlyandcontinuouslymeettheirneeds.They mustcontinuetoquestion,informandinsomecasesdrivetheirprocessingpartnertonewlevelsin processingandinnovationthatleadstoflexibilityandoperationalefficiency. Inadditiontotheproductcapabilitiesandbreadth,thereisasecondlevelofcomplexitythatprocessors musttakeintoaccount.Theprocessorstrulycapableofcapitalizingontheevolutionofprepaidwill providetheirissuingclientswithflexibleauthorizationparameters,feeoptionsanddecisions,fraud parameters,loadoptions,purchaseoptions(web,retail,inbranch),activationapproaches,etc.,all respondingtotheuniqueneedsofamyriadofopportunities.

ThePrepaidCardandtheIndividualRelationship
Prepaidproductsmovingforwardcouldwellformthebasisfordeeperrelationshipswithindividual cardholdersmorecloselymirroringthedebitcardorcreditcardrelationshipofthepresent.The evolutionwillbecenteredonindividualrelationshipsbetweenissuersandcardholders,withgreater longevityfortherelationshipderivedfromtheproductandprogram.Asmoreconsumersutilizeoneof variousprepaidproductsastheirprimarypaymentmechanism,theywillplaceagreaterimportanceon therelationshipwiththeissuerofthatprepaidproduct.Themarketwillbecomelessfragmentedand separatedbytypeofprepaidproduct.Conversely,therelationshipwiththeindividualcardholdermaybe lessfocusedontheproductassemidisposablepayrollcardslinkedtooneemployer,orgiftcards

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WhatWillCharacterizetheEvolutionof Prepaid?
linkedtoonemerchant,forexampleandmorefocusedonthelongertermpossibilitiesofa relationshipbetweenissuerandcustomer,turningtheprepaidrelationshipintoastrongerandmore lucrativebondbetweenindividualandissuer. Historically,prepaidcardproductshavebeeninstitutionallydriven,withthefocusontheissuing entityastorebrandedgiftcard,oracompanypayrollcard,forexample.Asmoreconsumersbecome reliantontheprepaidproductastheirprimarypaymentvehicle,however,theopportunityforfinancial institutionsandotherprepaidcardissuerstoestablishmoredeepseated,individualrelationshipswith prepaidcardholderswillexpandconsiderably,forbothretailtransactionsandbillpaymentactivity. Issuerscanthereforetakeadvantageofthisbehaviorevolutionandopportunity,whichwillresultina tremendousincreaseintheaveragelifetimevalueoftherelationshipwithaprepaidaccountholder, regardlessofproducttype. Thepayrollcarddeepensbothcommercialandconsumerrelationships,andisattheheartofthe evolutionstrategyformanyfinancialinstitutionsandotherplayers.Thismindsetpresentlymost readilyapparentinthepayrollcardproductcouldalsopervadetogeneralpurposereloadablecards, particularlyamongcertainsubsectionsoftheconsumerpopulationthatshowahigherpropensitytouse prepaidproducts,includingyoungerconsumers,aswellasunderbankedandunbankedconsumers. Severallargeinstitutionsandotherplayersintheprepaidspace,forexample,arefocusingonthepayroll cardasaprimaryvehicleforthisevolution. Thecombinationofbolsteringcommercialrelationshipsthroughthisoffering,aswellastheextended outreachtoindividualcardholdersforsomepotentiallytheonlybrandedpaymentcardthey possessmaybethoughtofasanevolutionarystageinprepaidcardevolution.

ChoosingaPrepaidProcessorinanEvolvingMarket:AStudyonIssuerandProgramManagerNeedsNovember2008

WhatWillCharacterizetheEvolutionof Prepaid?

Companieslookingtoentertheprepaidarenaneedto lookattheholisticcapabilitiesofprocessingsolutions, understandingthevariouscomponentsofaneffective prepaidprogramoperationandhoweachcomponentis implementedandmanaged.

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TheComponentsofaPrepaidProcessing Program
ManagingtheCard
CardIssuance/Creation:The platformmustprovidethe capabilitytoissuetheplastic(or otherformfactor)cardtothe specificationsandtheparameters oftheproductsetandspecific needsofeachissuer. CardEnrollmentOptions:Various products(giftcard,spending, payroll,etc.)havedifferingneeds forenrollmentandmanagement. Theprocessormustbeableto managethesedifferencesina seamlessandcomprehensivemannerfortheissuerandprogrammanager. InitialCardLoad:thenatureofprepaidproductsmakesthisfunctioncritical.Gettingfundson thecardregardlessofproducttypeisthebasisofusage.Processingplatformsmustprovide multipleoptionsandembracevariousloadstrategiesmakingitsimpleandefficientforend userstoloadthecard.Availyourselftoasmanyloadoptionsaspossible,including,butnot limitedtothefollowing: Aloadnetworkatthepointofsale(suchasVisaReadylink;Greendot,orothers) ViaACH Corporateloads(accounttransferw/inoneFIgenerallyspecifictopayrolland incentivecards,butpotentiallyforotherproductsandapplications) Fundingfromanothercard

Online Viamobiledevice ViavariousATMnetworks

Thereisalargedisparityamongprocessorsinthenumberandtypeofloadnetworkstheysupport, whichwillalsogreatlyaffectevolutiontovariouscapabilitiesandproducts.Thiswillbeparamountinthe coming5yearsasproductsandneedsexpand.Prepaidissuersmustthoroughlyexploretheneedsfor cardloadsandunderstandtheassociatedcapabilitiesoftheirprocessors.

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TheComponentsofaPrepaidProcessing Program
CardReload POS ATM Evolving Other CardReissuance:Whataretheprocessesinplacetoimmediatelydeliverreissuedcards, andhowdoestheprocessorhandleinventorymanagementofreplacementcards? Whetherthisisaninhouseactivitythattheprocessorperforms,ordonethrough establishedpartnerships,theprepaidissuermustensurethatthecardreplacement processisseamlessandwithoutproblemtotheenduser.Thiswillbeofrisingimportance shouldtheprepaidcardbecometheprimaryandinmanycasestheonlypayment mechanismthatenduserscarry.Replacementisahighprofilesegmentofaprepaid programthatcanreadilyexposefaultsintheissuerprogramandbethecatalystforlost customersiftherearehiccupsintheprocess.

ManagingtheCardholder
CardholderCare(CallCenter Services):Manyissuersrelyon theirprocessortoprovide variouslevelsofcardholdercare, operatingnotonlycallcenters, butalsoprovidingthecapability foronlineenduseraccount management.Thisisparticularly importantforissuersofprepaid payrollcards,butextendsto otherproducts,particularly reloadablespendingcards,but alsowithstandardgiftcards. Issuersmustfullyanalyzethese capabilitieswitheachprocessor,matchingthemtotheirperceivedneedsandtothoseof endusers. StatementGeneration,BalanceInquiryCapabilities,(online,viaATM,IVR,andpotentially viaSMS):Withtheevolutionofreloadableprepaidproducts,itisincreasinglyimportant

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TheComponentsofaPrepaidProcessing Program
thatendusershaveconstantaccountmanagementaccess,andthatthisiscongruentwith technologyevolutionforotherpaymentproducts.Istheprocessorprovidingforaccount accessviathemobilechannel,forexample,or AuthorizationRoutingandManagement:Doestheprocessorhaveexperiencemanaging theauthorizationofprepaidcardtransactionsandthespecificsassociatedwiththevarious prepaidproducts?Cantheprocessorleveragepaymentexperiencebeyondprepaid productstoprovidefullcoverageforauthorizationandtransactionrouting? FraudMitigationMonitoring,IdentificationandManagement:Whataretheprogramsthat theprocessorhasinplacetomitigatefraud?Doestheprocessorhaveexperienceitcan leveragefromitsprepaidorotherlinesofbusinessthatgiveitarealadvantagein understandingfraudandassistingprepaidissuerswhollyandcompletelytodealwithfraud issues? ComplianceKnowYourCustomer(KYC),AntiMoneyLaundering(AML),otherissues:This islikelytobecomemoreandmoreimportant,asregulatoryagenciesandlawenforcement organizationsappeartobefocusingonprepaidproductsasamajorsourceoffraudand moneylaundering.Theprepaidissuershouldbeheldtohigherscrutinybecauseofthis. Howisyourprocessorthereforeequippedtoproactivelyandreactivelyaddressthese concernsandprovidethepeaceofmindwhenissuesarise?

ExecuteTransaction
CardUsage:Theprocessormustbe abletohandlethevariousnuancesof prepaidretailtransactions,including standardtransactions,splittender transactions(usingtheprepaid productforpartofthetransaction andanotherpaymentmechanismfor theremainder),aswellasvarious authorizationstrategiesassociated withthesenuancedtransactions.This againisoftenrelatedtothe correlatingexperiencethattheprocessorhasandtheknowledgeofpaymentsitcanuseto drivethesespecifictransactiontypesforvariousproducts.Theprocessormustalsobeable todrivenonretailcardusage,suchasATMaccessormoneytransfertransactions.This

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TheComponentsofaPrepaidProcessing Program
includes,butisnotlimitedtotheexpansionofthesetransactionsthroughnewemerging noncardmechanismssuchasmobilehandsets. ExceptionTransactions:Doestheprocessorhavedeepseatedknowledgeand understandingoftheintricaciesinvolvedinrecognizing,processingandservicingexception transactions?Cantheprocessoreffectivelymanagechargebacktransactions,dealwith negativebalancesonthecard,andmakethesecapabilitiesasinvisibleandsmoothas possiblefortheissuer?

PlatformManagementandGrowth Potential
ValueAddedServices:itisimportantto knowtowhatextenttheprocessor supportsadditionaltransactiontypes andservicesofferedtoendusers, includingbillpay,moneytransfer, amongothermechanismsthatwillgain prominenceasprepaidusagebecomes moreprimaryamongagreaternumber ofconsumers. CardMarketing:Howcapableisthe processorinworkingwithissuerstomarketthecardproducts?Howinnovativeand consultativecantheprocessorbeinpromotingtheprepaidproductsandtheirusage?Can theprocessordeliverthemarketingsupportcommensuratewitheachissuersneeds? Reporting:Processorsmusthavetheintegratedcapabilitytodelivereffectiveprogramand individualaccountreportingtomeettheneedsofissuerswithregardstoportfolioanalysis, aswellasindividualaccountanalysis.Withmanyissuersseekingtoleveragetheprepaid productasacatalysttodeeperproductrelationshipswithendusers,reportingbecomesan effectivetoolinanalyzingindividualcardholderreadinessforthoseadditionalproducts. Issuersmustfullyanalyzethereportingcapabilitiesofferedbytheirprocessorasitrelates totheirneeds. ConsultativeRelationship:Istheprocessorreactivelyprovidingwhatissuerclientsrequest, orknowledgeableenoughabouttheevolutionoftheprepaidmarkettoproactivelyassist theissuerindefiningthoseneeds?Cantheprocessormovefromtheneedsdefinitionto implementation,andthentheevolvingneedsdefinitionstageoncetheplatformisupand running.Theprepaidprocessorsthatstandheadandshouldersabovethemyriadarethose

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TheComponentsofaPrepaidProcessing Program
thatprovidemorethanjustthenutsandboltsprocessingsolution.Thosethatcanwork withclientsandactuallyhelpgrowclientsprepaidprogramsthroughaconsultative relationshipareprocessorsthatdemonstratethemostvalueoverthelifeofaprocessing relationship. TechnologyExpansion(contactless,mobile,etc.):Istheprocessorpoisedtoprovideinroads toevolutionarytechnologyintheprepaidspace?Handinhandwiththeconsultative relationshipistheabilityoftheprocessortoseamlesslyandconsistentlyprovideissuers withthelatesttechnologyadvancements,suchasaccountaccessthroughmobiledevices, thepotentialforcontactlesstechnologyinstandardcardformfactor,withinthemobile device,orelsewhere.Theprocessoristheprimaryconduitfortheissuerintheawareness andimplementationofthelatesttechnologyinprepaid.Issuersneedtohavetheimplicit trustintheirprocessortobeonthecuttingedgewithtechnologyadvancesandtoassist theminapplyingtechnologytomeettheevolvingneedsoftheirendusercustomers. ProductBreadth:Theprocessormustbeabletomeettheproductneedsoftheissuer, servicingtheuniquecharacteristicsofthebaseofprepaidproducts,whichmayinclude: Consumerself(travelcard) Consumerother(giftcard) Employer(payroll,incentive,spending,fleet,pettycash) EmployeeBenefits Government Teenspendingcard Reloadablespending(generalpurposereloadable) MerchantspecificIncentive/Rebate Healthcare

NoProcessorcanmeeteveryneed,butitisimportanttofindarelationshipthatmost closelymatchesyourproductevolutionstrategy,andaddressesallfunctionality.Issuers withahealthcarefocusmayneedtoseekoutarelationshipspecifictothatproductset, potentiallyseparatefromtheprimaryprocessingrelationship. SupportforEstablishedRelationships:Cantheprocessorleverageandsupportpreexisting acquirerrelationships?Iftheissuerneedstobuildgatewaystovariousacquirers,canthe processoraccomplishthis?Arethosegatewaysestablishedorwouldtheybespecial orderandpotentiallydelayedbythecertificationprocess?Shouldthisprovetobean imperativefortheissuer,thesequestionsmustbeposedtodeterminetheviabilityand compatibilityoftheprocessorwiththeissuerneeds.

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DispellingMythsAboutPrepaidProcessors
PrepaidEvolution:ScalabilityinTransactionVolumeandProductBreadth Myth:TransactionVolumeScalabilityisEasyas123
Prepaidissuerscertainlylookattransaction volumegrowthasoneprimarymeasureof success.Butwithgrowthcomesthereality thatprocessorsmayhavetostruggletoscale tomeettheongoingneedsoftheirissuer clients,particularlyatpeakvolumeperiods. Theincreasedimportanceofawidervariety ofprepaidproductsleadstomoreindepth needsfromtheoperatingplatformand processor.Speedtomarket(i.e.getmeup andrunningyesterday!),whileimportant, cannotbethedrivingfactorinselectinga
Baselinefunctionalitymayinclude,butisnotlimitedtothe following:Cardmanagement,cardholdercare,robust transactionprocessing,andtacticalconsulting.Additional featuresexpandasprogramneedsexpand.Thesegenerally includeamorestrategicconsultativerelationship,anda deeperunderstandingofthecomplexitiesfacingeach individualprepaidprogram.

prepaidprocessingprovider.Reliability, scalability,hardenedsecurity&compliance standards,productevolutioncapabilities,and increasedportabilityforendusersare primaryfactorsthatprepaidissuersmust consider.

Surprisingly,thesecapabilitiesarenotreadilyapparentamongallplatformproviders.Duediligence surroundingtheprocessingcapabilitiesandplatformuptime,forexample,isamustforallcompanies consideringamajorinvestmentinaprepaidplatform.FundamentalscountThoseluredbythebells andwhistlesofapointsolutionoraquickinstallationwilllikelyfallshortintheabilitytofosterlong termgrowth.Additionally,longevityandexperiencecount.Processorswithlargescaletransaction processingexperience(debitandcredit)havelearnedthroughdoinghowtoeffectivelyandefficiently provideprepaidprocessingservices.Manyissuersandprogrammanagershavereachedlevelsofsuccess withtheirbusinessthatismakingthemtakeasecondlookattheirprocessorscapabilities.Successand growthinprepaidrequiresmanyofthesenewquestionstobeaddressed.

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DispellingMythsAboutPrepaidProcessors
ReliabilityandScalabilityinTransactionVolume Myth:AllProcessorsExperienceLittletonoDowntime
Formanyprepaidcardissuers,thepointofsale(orpurchase)isoftentheprimaryandcertainlyrecurring opportunitytheyhavetoprovetheintegrityoftheirproductandvalueoftheirbrandtoformand maintainatrustedrelationshipwithcardholders.Thisistrueforbothpurchasetransactionsandfurther emphasizedforreloadcapabilities.Customersneedpurchaseandloadcapabilityatalltimes.For reloadablespendingcards,andevenforgiftcards,thereputationoftheissuinginstitutionisatstake witheachtransaction.Ifitdoesntwork,customerswalk.Andtherealityisthatnotallprepaidprocessor orplatformscanprovidethelevelofreliabilitythatissuersneed.Atthemostbasiclevel,theprepaid processingplatformmusthaveaproventrackrecordofreliability.Cantheplatformbeupandrunning atalltimeswhenneededwhetherthatbepre,during,orpostpurchase? Handinhandwithreliabilityisscalability.Prepaidcardissuersmustalsoassessthecapabilitiesofthe platformtogrowastheirneedsgrow,firstandforemostintermsoftransactionvolume.Istheplatform robustenoughtohandleexpandingtransactionvolume?Pointsolutionsmayservewellinthepresent, butastheprepaidissuanceprogramexpands,cantheprocessingplatformexpandtomeetvolume needs?Includedinthisarealsothevariousfunctions,suchasinventorycontrol,fraudmitigation, reporting,andtransactionsettlementaretheyallcontainedwithintheoneplatform,ordoesthe issuerneedtocobbletogetherpiecesofthisfromvariousplayers? Theseissuesextendfurthertothespecificprogramelementsthataffecttheissuercustomer relationshipmostpredominantly,includingauthorizationperformance,callcenterandVRUcapabilities, fraudmitigation,onlineaccountaccessandusage,amongothercapabilities.Howarethosecapabilities measured,andwhatistheperformancerecordovertime?Moreimportantly,howdoestheprocessor trackperformanceandworktowarditscontinualimprovement?Prepaidissuersmusthavethese questionsansweredandnotassumetheyareinherenttoallprepaidprocessingplatformsandservice providers.

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DispellingMythsAboutPrepaidProcessors
CustomizationandProductEvolutionCapabilities Myth:OneSizeFitsAllIssuersSeekStaticProcessingSolutions.
Prepaidmeansdifferentthingstodifferentplayersandissuerneedsareeverevolving.Therealityisall processorsfacethechallengeofmeetingthediverseandexpandingneedsofprepaidmarketplace.The lineofquestionsincludesthefollowing: Doesprocessorhaveademonstratedrecordofcontinualinvestment? Dotheyhavelongtermproductroadmapandwhatistheirtrackrecordindeliveringontime againstit? Havetheydemonstratedtheymeettheircommitments? Dotheyconsultwiththeircustomers? Doesthisconsultationhappeninaoneononeenvironmentorbyfacilitatingjointcustomer workinggroups? Manyprepaidprocessorsareillequippedtohandlethedynamicnatureofthoseneeds.Asindicated previously,theprepaidmarketmovingforwardwillencompassawidervarietyofproducts.Different issuerswillseevalueindifferentproducts,andopportunitieswillariseforindividualissuerstoexpandto additionalproducts.Infact,prepaidcardissuersarealreadytakingadvantageofexpertisetheyhave gainedwithoneproducttoseamlesslyextendtheirlinesofbusiness.Theprocessormustserveasa conduittothatproductexpansion,andmusthaveexpertiseinthevarioussuccessfactorsandneeds associatedwithdisparateproductsets.Forexample,giftcardprograms,reloadablespendingcards,and payrollcardprogramshavedifferentendusers,reportingneeds,paymentnetworkaccessneeds,among otherdifferences.Doestheprepaidprocessorhaveexpertisewitheachoftheseproductstoprovidefor thisseamlessexpansion?Cantheprocessorworkwiththeissuertostrategicallyandeffectivelydevelop theseproductlines? Prepaidissuersmusthaveanunderstandingofwhethertheprocessorcanmeetalloftheseneeds movingforward.Thiscanbequitedifficult,ofcourse,asthoseforwardneedsmaynotbeclearlydefined fromtheoutsetofenteringtheprepaidspace.Itisforthisreasonthatissuersmustbemore comprehensiveintheiranalysisandvettingofprocessorcapabilitiesthinkingmoreholisticallyabout whattheymayneedandwhethertheprocessorcanprovideit.

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DispellingMythsAboutPrepaidProcessors
Security,RiskManagementandCompliancearenotGivens,andIssuersareMore HighlyScrutinized Myth:AllProcessorsProvideEffectiveRiskMitigationandCompliance
Securityandriskmanagementareparamountinprepaidcardissuancebothwithrespecttofraud mitigationandalsointhescrutinythatissuersfacetocomplywithmoneylaunderingandhomeland securitystandards.Prepaidcardissuersmaybeincreasinglyheldaccountablefortheactionsofnotonly theirimmediateconstituentsandcustomers,butalsotheindirectusageoftheirproductsdowntheline. Secureprocessingisthereforeonlyoneaspectofprepaidcardsecurityoverall.Issuersmustthoroughly analyzetheprepaidprocessorscapabilitytoalsoprovideAMLandKYCcapabilities,aswellasother homelandsecurityinitiatives.Theseissuesarestandardforprocessorsfamiliarwiththefinancial institutionregulatoryarena,butinrealitysometimesfalloutsidethesetofcorecompetenciesfor prepaidpointsolutionprovidersandprocessors.Canthefollowingprocessesbehandledefficiently fraud,riskmitigation,compliancetools,flexibilityinrulesets,parameters,reporting,onbehalfof services.Securityandpeaceofmindintheprepaidplatformcanbeviewedinvariousways.The followinganglesareparamountwhenanalyzingthesecuritycapabilitiesoftheprepaidprocessor: Thesecurityofastablesystem; Thesecurity(i.e.,confidenceandpeaceofmind)fromworkingwithanexperiencedpartner; Thesecurity(i.e.,protection)fromfraudrisksandscams;and Thesecurityinknowingthatoneiscomplyingwithcompanyandregulatorypolicies. Whenalltheseabovesecurityquestionsareadequatelyandproactivelyaddressedintheplatform decisionprocess,prepaidissuerscanmoveforwardandgrowtheirprogramsmoreeffectivelyandmore securely.

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DispellingMythsAboutPrepaidProcessors
TransactionProcessingandAssociatedServicesMakeaCompleteCircle:CanYour ProcessorHelpyouDriveStrategy? Myth:ProcessorsNeedOnlyProvideProcessingCapabilities
Theprepaidprocessingplatformisonlyasgoodastheprocessorbehindit.Thebottomlineforprepaid issuersistheformationofaconsultativerelationshipwiththeprepaidprocessor,somethingthatin realitynotallprocessorscaneffectivelyprovide.Theprocessormustprovideknowledge,expertise, andstrategicdirectionaswellasprofessionalservices,integrationandtransactionprocessing.Partof theevaluationthatallprospectiveprepaidcardissuersmustmakeiswhethertheprocessorhasthe marketknowledgetotrulydrivethebusinessanticipatingfutureneeds,fleshingoutandmanaging expectationswhicheverdirectiontheissuermaytake.Thepathtorevenueandprofitabilityisnotthe sameforafinancialinstitution,amerchant,andotherthirdpartyissuers.Successfulprepaidprocessors willproactivelyevaluatethemarketopportunitywiththeirclients,notreactivelybuildsolutionstomeet thepredefinedneedsofthoseclients.Often,thoseneedsarenotpredefinedorevenknown.The expertisethattheprocessorbringstotherelationshipmayprovetobestrategicallyinvaluable.Issuers mustask:Isthisvalueinherentintheplatform,orarethebuilds(extensions)reactivetocustomer needs?Thevalueoftheconsultativeprepaidprocessingrelationshipreachesbeyondtechnical integration.Strategically,theplatformprovidermustbeabletoproactivelycreateneedscenariosand drivetheclienttotheunderstandingofhowtobestdevelopproductsthatdriveprofitabilityandfully leverageprepaidcapabilities,leadingtogreatercustomizationcapabilitiesandinturn,greater customizationinimplementations.

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DispellingMythsAboutPrepaidProcessors
CanCreditandDebitExperiencebeLeveragedinthePrepaidSpace? Myth:CreditandDebitCardProcessingExperienceandArchitectureisIllSuitedfor Prepaid
Therehasbeenanabundanceoftechnologyapproachestoprepaidprocessingsystems,andinturna varietyofmodelshaveemergedwhichpromisebothanopensystemandopenarchitecture.Promisesof newer,cheaper,better,andfasteraboundintheprepaidprocessingspace.Therealityisthat experienceisnecessarytofullybuildavailability,security,andflexibilityintoaprepaid platformthatmeettheneedsoftoday'smarketswiththecapabilitytoeasilyaddresssubsequentyears continuedgrowth.Leveragingthatexperienceeffectivelydeliversvalueforissuersandprogram managers,aswellasforprepaidcardusers. Theprovenflexibilityandavailabilityofcreditanddebitcardplatformshavebeenutilizedasthecore processingengineforprepaidplatforms,withopensystemsintegrationtoseamlesslyextendthose servicesintootherplatformsviawebservices,includingthefollowingfunctionality: Inventorymanagement Fraudandriskmanagement Nonfinancialtransactionprocessing WebandIVR Fundamentally,thedifferentiatorofthecreditordebitcardplatformatitsfoundationistheavailability oftheprocessingengineandtheflexibilitythatcanbeprovidedthroughtheadditionofdistributed architectureprinciplesandtechnologies,abalancethatpointsolutionsandplatformsmaynotfully address.

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DispellingMythsAboutPrepaidProcessors
ConversionsarePainfulImplementationsShouldnotBe Myth:ImplementationandConversionCapabilitiesareaDimeaDozen
Whatrecorddoestheprepaidprocessorhavewithnewprepaidcardprogramimplementationsand conversionsofexistingprograms?Thesequestionsmustgowellbeyondthetimetabletobeupand running.Quickimplementationdoesnotalwaysequatewithworryfreeimplementation.Howdoesa processordifferentiatebetweenaconversionandamigration?Whatarethecompellingreasonsforthat migration? Alargepartoftheconsultativerelationshipisthecoreimplementationandthemigrationorconversion knowledgethattheprocessorbrings.Implementationsshouldnotbepainful.Theyshouldbethoughtful, withheavyplanningintheearlystages.Heretoo,experiencecounts.Theabilitythattheprocessorhas tomaketheimplementationorespeciallytheconversionaspainlessaspossiblefortheprepaid issuer,potentiallyhandholdingthroughtheprocess,willprovetobeinvaluable.Someprepaidissuers wouldratherstaywithaprocessorthatdoesnotmeettheirgrowthneedsthangothroughthe perceivedpainofaconversion.Processorswithprovenconversioncapabilities,andofcourseproven robustplatforms,canenableprepaidissuerstorealizethefullpotentialoftheirprepaidprograms.In reality,thiscapabilityisaprovendifferentiatorforselectprocessors,andissuersmustdigdeeptofind thatcapability.

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DispellingMythsAboutPrepaidProcessors
IstheProcessorPreparedtoEmbraceTechnologyEvolution? Myth:TechnologyisIrrelevantandStagnantinPrepaid
Furthertotheproactiveandforwardthinkingthataprepaidprocessormustprovideisthecapabilityto expandastechnologyexpands.Technologyenhancementsenablefurtherexpansionofprepaid programs.Thestandardmagneticstripe,creditcardformfactorforprepaidproductsmayevolveas othercardproductsandthepaymentsinfrastructureevolve.Thisincludescontactless(standardcard formfactor,keyfobs,others),andvirtualprepaidcardsembeddedinmobilehandsetsorothermobile devices.Uniqueandinnovativesolutionsandtherealizationofmoresolidprepaidprogramsmaybe linkeddirectlytotechnology.Prepaidissuersmustthereforeaskwhethertheprocessorispreparedto takeadvantageofcapabilitiesandcorrelatedpotentialsourcesofgrowthsuchascontactless.Isthe processorattheforefrontofallpaymentinitiatives,orlackinginbreadthandhencemissingouton expansionpossibilities?Inreality,thismatters.

FinancialInstitutionReactionandNeedsarefocusedMoreonBrand
Financialinstitutionsandthosecompaniesthatarepartofthesupplychainwhohelpbringprepaid cardstomarketbenefitfromnotonlytheprocessingrelationship,butalsothepowerofstrong,trusted brandsboththeirownandthoseofthepaymentnetworksinextendingtovariousprepaidproduct categories.Dependingonthesizeoftheinstitutionandthenatureofthecardprogram(howrobust, howmanycardsissued,thetypesofproducts,etc.),the financialinstitutioncouldrelyheavilyonthecardbrand andtheinherentprepaidcapabilitiesofthecardnetwork. Anyprocessordecisionmustthereforetakeintoaccount therelationshipandinteractiontheprocessorhaswith anyandallcardbrands.

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SummaryandWrapupKeyConsiderations foraPrepaidProcessingRelationship
Thereareanabundanceoffactorsthatprepaidissuersmustconsiderinestablishingarelationshipwith aprocessor.Theprocessordecisionisnotonetobetakenlightly.Astheaboveevidenceindicates,the analysisofaprocessorfitismultifaceted.Primarily,issuersmustremembertolookforthefollowing keyaspectsandstrengthswhenchoosingaprocessor: Aprovenrecordofastable,reliableplatform Productbreadthandevolutioncapabilities Scalabilitytheinherentcapabilityoftheprepaidprocessor Theprocessorsabilitytoserveasaconduittoproductexpansion Experienceandlinktomajorcardbrands Provenrecordinmanagingallfacetsofthecardprogram Cardcreation Cardload Retailtransaction Transactionauthorizationmanagement Cardholdercare Riskandexceptionmanagement

Technologyevolutioncapabilities Consultativerelationship

Theproductiverelationshipbetweenprepaidissuerandprocessorisonethattakesfulladvantageofall capabilitiestheprocessorhas,movingwellbeyondsimplenutsandboltstransactionprocessingtoanin depthinteraction.Theparagonbeingasituationinwhichtheissuercanrelyontheprocessorformore completeprogrammanagementassistanceandcollaboration.Thisisnotaneasysituationtocreate,and itrequiresadeeperlevelofanalysisonthepartoftheissuer.Onceitisattained,however,the possibilitiesforexpansionoftheprepaidprogramareenhancedmanyfold.

IncollaborationwithVisaDebitProcessingService,Javelinhaswritten,ChoosingaPrepaidProcessorinanEvolvingMarket:A StudyonIssuerandProgramManagerNeeds.VisaDebitProcessingServicepartiallyunderwroteJavelinscostofdatacollection, analysisandreportinginthisstudy.Javelinretainscompleteindependenceofdataanalysisandreporting,andthisreporthasbeen createdsolelybyJavelinemployees.

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