The corporate prepaid card market is already a success story in the US and there is significant and growing interest throughout Europe in the potential benefits that this product can bring to private and public organisations, with some interesting solutions beginning to emerge. In this Product Profile we examine Citi’s prepaid card solutions and give an overview of the wide range of applications offered by this product.
Overview
Over the past decade, a revolution has started to take shape around the emergence of electronic payments, replacing antiquated paper cheques and the inefficient, expensive processes and resources they demand. This shift, together with a move towards more environmentally-friendly, paperless solutions, has resulted in an increasing number of public and private sector organisations adopting prepaid solutions for a wide array of payment applications.
Already a success story in the United States market, corporate prepaid programmes have been used in a number of industries with a variety of applications. Organisations are benefiting not only from faster, more dependable payments, but also from dramatically reduced costs and enhanced efficiencies. These improvements are not finance specific however, and have the potential to impact many different departments across the organisation.
What are prepaid cards?
Prepaid cards allow users to access, within limits, a pre-funded pool of capital, meaning that payment essentially precedes purchase. Whereas a credit card, for example, allows the user to make a purchase first and pay later, a prepaid card requires payment before any purchase is made. In the corporate and government space, prepaid cards can act as a convincing replacement for paper based payments such as cheques, cash and vouchers. They can also be used to eliminate paper statements, for example, from an organisation’s payment process for faster, cheaper and more efficient electronic payments.
Prepaid cards can be loaded with one-time or multiple payments, with value stored on a remote server rather than on the card itself. Recently a wide range of applications has been developed and the potential for using prepaid cards in the corporate and government context is beginning to be realised.
Citi® Prepaid Services
The prepaid programmes offered by Citi® Prepaid Services provide recipients with an electronic account which can be loaded with single or recurring payments from an organisation. These could be payments made for a variety of reasons, including benefits, incentives, compensation, rebates, emergency relief, claims, refunds, rewards, and more. From this account, funds can easily be accessed by the recipient via a variety of methods that include:
Purchases using the prepaid card (eg retail, phone, online).
ATM cash access.
Bank branch cash advance.
Bank fund transfers.
Cheque.
At the heart of this funds access is a Visa® prepaid card, which can be fully customised with the organisation’s brand and messaging. This card looks and fundamentally works like a credit card for purchases, but the prepaid card has no credit line and can only be used for an amount up to and not exceeding the balance paid into the account.
A personalised prepaid card allows the recipient to purchase items or services at millions of retail locations, by phone or online. The card can also provide optional ATM cash access or bank branch cash advance functionality.
The benefits
One of the major benefits of Citi’s prepaid solution is that organisations can provide accounts to cardholders without requiring a credit check, review of bank accounts or burdensome applications. This allows an organisation to take advantage of its programme on a widespread basis, thus leveraging the cost saving benefits associated with the elimination of paper, along with the substantial resources typically required to produce and distribute cheques.
Cardholder benefits
Aside from their organisational benefits, personalised prepaid cards provide valuable cardholder benefits as well. Payment recipients, whether beneficiaries, citizens, employees, sales professionals or customers, can benefit from the flexible fund access choices, convenience and security associated with this type of solution.
Website
In addition, a Citi® Prepaid Services programme offers cardholders access to a fully customised website that can be used to manage their accounts, view their transactions and payments, check their fund balance and get assistance.
This website also provides a direct communication channel for the organisation to deliver important information and updates to cardholders. Cardholders may register for account activity and balance alerts delivered direct to their email or mobile phone via text message for added control of their funds.
Across the organisation
As financial departments look for ways to enhance their cost and operational structures, an increasing number of treasury groups are adopting corporate prepaid solutions, and the electronic payments they provide, to reduce administrative costs, build operational efficiencies and gain greater visibility into their payment programmes through enhanced reporting and tracking.
Citi® Prepaid Services reports that most clients who use prepaid solutions tend to have forward-thinking treasury groups. These groups often take a progressive approach to their solutions, looking to implement Citi’s prepaid programmes across their organisation in order to provide benefits for a variety of departments, while achieving their own goals of cost reduction and improved operational efficiency on a significant scale. For many clients, the treasury group is serving as a champion, introducing the benefits of programme adoption to each department, while also helping management to understand the gains that prepaid programmes can bring to the entire organisation.
Prepaid cards can be used for payments in areas such as payroll, sales incentives, employee rewards and consumer incentives (for example, ‘buy this camera and receive €50 cash back’). Consequently the following departments may benefit from prepaid solutions:
Treasury/Finance
Reduced administrative costs and resources.
Elimination of production and distribution costs.
Streamlined operations.
Robust reporting and tracking.
Sales
Faster, more efficient payments.
Enhanced recipient experience and retention.
Robust reporting and tracking.
Unique, effective communication channel.
Marketing
Enhanced recipient payment experience and reward preference.
Economical acquisition and retention channel.
Robust reporting and tracking.
Unique, effective communication channel.
Driving incentive payments back to the client as incremental turnover, up to 30%.
Interview
Citi® Prepaid Services
Thore Vestergaard
EMEA Market Manager
What makes Citi’s offering unique?
There are a number of things. First of all, we are actually able to offer this type of turnkey solution, which not many banks can do. Ours is a corporate payment solution, which means our platform is built based on 11 years’ experience in the corporate and government prepaid card industry. Due to the size of our operation we can confidently manage even the largest government programmes, potentially involving millions of beneficiaries.
The thing that really makes us unique, however, is our global positioning. Our programmes are offered on a global platform, which has the same look and feel across all markets but in line with local legal and language requirements. We are able to support multiple currencies and we can issue cards into multiple markets.
Right now we are live in numerous markets including Canada and the US and we are going live in the UK this month, followed by other European markets throughout 2009.
Where is the treasurer involved?
Treasury drives cost savings across the organisation. So when we save 50-80% of their paper-based processing costs by converting payments to prepaid cards, the treasurer is the key stakeholder in that and the key driving force. There is always a very positive impact to treasury in terms of cost savings and automating payments etc, but the key impact and benefits of a prepaid card programme are felt by sales, marketing and HR, depending on the type of programme in question. The treasurer frequently manages the relationship with us, so we need their help to explain the benefits of the product to the key stakeholders across the other payment flows.
What sort of take up are you seeing?
We are expecting a large take up, across all sectors. There’s really not a single sector that doesn’t have a need for this product. The larger the corporate, the more applicable it can be.
This area is enormously busy right now. Everybody is waking up to the possibilities and more and more of our clients are asking about it. In the UK we also experience a growing demand by governments and local councils who are looking for automated ways to pay the unbanked or people for whom they don’t have banking details. This could be anything from pension payments, benefit payments and other government disbursements – generally these are cash, voucher and cheque based payments.
Human Resources
Unique employee benefit.
Enhanced recipient experience and preference.
Reduced administrative costs and resources.
Robust reporting and tracking.
Operations
Simple, streamlined payment process.
Quick, turnkey programme implementation.
World-class, comprehensive support.
Little to no development, reduced administrative resources.
Payroll
Faster, more dependable payroll delivery, for example for unbanked employees or during natural disasters.
Enhanced, streamlined process.
Dramatically reduced costs.
Greater employee satisfaction, reduced turnover.
Security
Usually cards will need to be activated once received by telephoning a dedicated contact centre and answering a couple of questions – these may include the card number and the beneficiary’s date of birth, employee or customer reference number, depending on the type of card.
Other security features include the following:
The website accessed by the beneficiary is password protected and the beneficiary must answer security questions the first time the website is accessed.
If a card is lost or stolen, the beneficiary is protected. The money is not held on the card itself but on the server and it is therefore simple to cancel the lost card and send a replacement.
Depending on the market, the cards may also incorporate security features such as ‘chip and pin’.
Every transaction must be authorised by Citi online and only the money loaded to the card can be spent. The card cannot go into negative balance.
Global expansion
Following its success in the United States, Citi® Prepaid Services is expanding into Europe, the Middle East, Africa and Asia. Citi Prepaid’s offering in these regions will be tailored to public and private sector organisations that are looking to dramatically reduce costs, streamline their operations and enhance the payment delivery process for their recipients.
Citi Prepaid will offer local corporates economical and efficient implementation that requires minimal resources. The implementation process is designed to be rapid and not disruptive to existing payment channels, with the beneficiary being able to use the prepaid cards within six to 12 weeks of adopting Citi Prepaid.
In addition, support from Citi Prepaid experts will be at hand for both clients and cardholders. “We work with companies in nearly every major industry,” says Thore Vestergaard, EMEA Market Manager, Citi® Prepaid Services. “We are very used to doing this.”
Education
Vestergaard advises that when implementing a prepaid card programme, education is key. This is particularly true in the area of payroll and social benefit payments, as changes to the way in salaries and benefits are paid have enormous emotional resonance for individuals. Citi works closely with corporates to develop an education programme, ensuring that the employees affected have adequate advanced warning that the change will be taking place. This might take the form of a document explaining when the change will be taking place, what the implications are and advice on how to open a bank account if employees do not wish to be paid by card.
Impact beyond the business
Rolling out electronic payments across an organisation via prepaid solutions will help achieve greater payment operational efficiencies and cost reductions. The prepaid programme also provides a ‘green’, paperless, environmental initiative, benefiting not only the organisation and recipients, but also the environment.
Conclusion
The area of corporate and government prepaid cards has achieved substantial growth in the US market in recent years. While the European prepaid market is less mature, the potential for this type of product is impressive and is already beginning to be realised.
Citi® Prepaid Services has harnessed much of the versatility associated with prepaid cards and already offers a wide range of cards to corporates and governments, with a firm focus on delivering a customised solution. It will be interesting to see how this area develops as Citi expands its offering across Europe in the next year.
About Citi® Prepaid Services
Citi® Prepaid Services (formerly Ecount) is a leading provider of innovative corporate prepaid solutions. Through a consultative approach, Citi Prepaid provides clients with comprehensive electronic payment programs that reduce costs, enhance operational efficiencies and provide an unmatched user experience. Leveraging an extensive payment platform and proprietary prepaid technology, clients around the world depend on Citi Prepaid’s custom programs for all types of payments including compensation, promotions and disbursements.
