Rewards on Prepaid

Rewards on Prepaid
We are all familiar with loyalty points and other types of rewards we get on credit cards. The economics (i.e. relatively higher interchange, opportunity to earn interest fees, etc.) and the stand-alone product nature (i.e. not linked to a current account) meant that many credit card issuers used to look for additional ways to stand out from the crowd to acquire customers. With economics deteriorating in recent years, the credit card rewards programmes are getting less generous, changing shape, or disappearing altogether – a subject I am looking at in more detail in my research at the moment. Those in the US are also very used to getting rewards on debit cards, something which doesn’t really exist yet in the UK. Again, it is yet to be seen where debit rewards will end-up given the Durbin regulation, but the early signs are that the shape of those is changing as well – some issuers are taking away debit rewards and others are looking for other ways to deliver them and are turning to providers such as Cardlytics for merchant-funded rewards. Then Orange in the UK announced in February this year that they are launching ‘Orange Cash’, “the UK’s first major contactless prepaid card”. In addition to regular payment features, the card allows “Orange Cash customers to earn points as they spend, which are redeemable against a range of rewards including Pay As You Go Orange texts, airtime, credit or Orange shop vouchers”. I believe it must one of the first examples of rewards on a prepaid card. Which actually makes sense – a prepaid card is also a standalone product that the customer needs to buy, so rewards can help differentiate it. And with various fees and interchange exempt from regulation (at least for now), the economics might look more attractive than many debit cards. As an “issuer”, Orange is also taking a relationship perspective and the rewards are designed to engender loyalty not just to the prepaid card, but also to the mobile network, still a primary relationship between Orange and most of its customers. This card is interesting from two other perspectives: a) It’s a prepaid contactless card. I’ve always maintained that contactless technology is most suited for prepaid wallets (from use case, not technology point of view) – given it’s “tap and go” nature, I would much rather expose my prepaid account which has limited funds than, say, my current account. b) It’s a stepping stone for Orange towards mobile payments. It gets their customers used to contactless and prepaid wallet concepts, both of which will be necessary when launching NFC-based mobile payments where Orange have strong ambitions. Now, if only someone could solve the contactless acceptance challenge…

Finovate Spring 2011 Roundup

Finovate Spring 2011 Roundup
Last week I headed out to San Francisco for Finovate Spring. Finovate is my favourite conference of the year for a few reasons. I actually attend the demos and am not in meetings the entire time; the demos are a short 7 minutes – more than enough time for an analyst to make a quick judgement; and finally, it is a true showcase of bank innovation. It’s a mix of companies, some are 2 guys in a garage, others are small companies, and a few are established players. The range of solutions on display is interesting, exciting, and thought provoking. This year, Finovate Spring was extended into a 2 day event with 64 companies presenting their wares. The event had a record turnout – I was told about 800 people. Banks are now very well represented at this event, something that was not the case just 2 years ago. Three key themes emerged from the conference: Bill pay is a commodity. The features and use around bill pay are where the innovation and opportunity lie. I was astounded at the number of firms with solutions related to bill pay. These included, Balance, Bill.com, Bills.com, BillFloat, ChargeSmart, Doxo, Mitek, paydivvy, and PayNearMe. P2P and other payments are being pitched in an effort to drum up interest. P2P payments, social payments, POS payments, you name it. Lots of want to be disruption here. Interestingly, the P2P payments vendor landscape is still growing with fims like Liqpay. Paypal/Discover demoed a joint solution. Other firms with payments related offerings are BrainTree, Dwolla,and peerTransfer . Small Businesses have online needs that aren’t being met. Startups and other firms have taken note. I recently spoke to American Banker about this trend. Firms in this space include, Bill.com, Kabbage, Lendio, Wipro, and Xero. Rewards Programs are all the rage. Banks are looking to cut costs, consumers want deals, and merchants want to better target potential customers. These presenting firms believe that this is a win-win combination – Billeo, BankOns, Clovr, and FreeMonee. There were still a fair number of PFM-like demos, but nothing that really grabbed the audience’s attention (or mine). I’m glad that this topic didn’t overwhelm this show as it has in the past. The question is which of the presenting companies did I like? In what’s become an annual tradition, I plan to profile my top 10 in an upcoming Celent report (link to 2010 report). The 2011 report will single out the innovative startups that Celent believes will have an impact on the banking space and/or the consumer market (many of these startups bypass the bank channel and market their products directly to consumers). Here are some of my selection criteria:
  • Realistic business model
  • Innovation and new product development
  • Potential for the solution to be sold by banks
  • Potential for the solution to fill a void in the market



The audience did have their favorites, and were asked for their top picks. The best in show awards went to (in alphabetical order) BancVue, Bankons, Dwolla, Mitek, oFlows, PayNearMe, and Wikinvest.

Stay tuned for the report. In the meantime I invite you all to post your Finovate comments and feedback.