OVER 25 YEARS OF SUCCESSFUL PRACTICE
Prepaid Cards & eCommerce Presenter: Lori Breitzke, President Date: Tuesday, January 10, 2012 Location: AECF
TOPICS TO DISCUSS • Prepaid cards 101 • Trends • Ecommerce and Prepaid • Fraud Cases • Best Practices
PREPAID 101
DEFINING PREPAID PROGRAMS • •
•
Prepaid programs are considered either “Open” or “Closed” Open programs are those where the value can be depleted at ATMs or at more than one merchant and usually bear the logos of: – MasterCard® – Visa ® – American Express ® – Discover ® – One or more of the PIN debit networks – STAR, Pulse, etc. Closed programs include: – Proprietary “Store” GiN Cards – Transit Cards; migraPon away from closed to open loop cards – University ID Programs encompassing local merchants – Telephony including Long Distance and Wireless – Loyalty and Affinity Programs
DIFFERENT TYPES OF PREPAID CARDS OPEN LOOP
CLOSED LOOP
PRIVATE LABEL
Carries network logo
Store or mall logo
Open network but restricted access
Sold in bank branches, internet, malls, retail
Can be used within specific stores only
Does not carry network logo
Issued by a bank - Regulated by state/federal government
Typically consumer only pays for the face value of the card
Can be used anywhere network accepted
Typically card has no consumer fees
Typically consumer pays a small fee for the purchase of the card
Regulated by state government
Typically card has no consumer fees
Card has some type of consumer service fees
Issued by a retailer
Issued by a bank - Regulated by state/federal government
Examples: SIMON mall gift card, Staples Visa Rewards
Examples: Best Buy, Home Depot, Joe’s Pizza Place
Examples: AT&T Wireless, Spa Escapes, Marriott Hotels
Can be used within specific stores only Typically consumer only pays for the face value of the card
DIFFERENT TYPES OF PREPAID CARDS CONSUMER GIFT
CONSUMER GPR
B2B INCENTIVE
Has longer-term expiration date
Has shorter-term expiration date
Sold in bank branches, internet, malls, retail
Can be sold in bank branches, retail stores or given to employees as payroll card
Is given to the consumer as a reward, rebate or incentive
Card can not be reloaded; initial load is consumer’s money
Card is reloadable by consumer and/or employer
Card can not be reloaded; initial load is corporate funds
Generally, card has purchase fee but no ongoing consumer fees
Typically consumer pays purchase, monthly and reload fees (not direct deposit)
No fees to the consumer
Issuer can not attempt to recoup ECV
Issuer can not attempt to recoup ECV
Issued by bank; processed by 3rd parties
Issued by bank; processed by 3rd parties
Example: SIMON mall gift card
Example: Money Card by Green Dot, Univision
Has short-term expiration date
Corporate sponsor will attempt to recoup ECV Issued by a bank - Regulated by state/federal government Examples: Verizon/AT&T Wireless Rebate; Bluegreen Timeshare Incentive, Smarty Pig
PREPAID CARD* TYPE DEFINITIONS
Card Type
DistribuPon
Typical # of Loads
Network
Examples
Payroll
Employers
Unlimited
Open
ADP Total Pay Card
General Purpose Reloadable
Retail / Direct to consumer
Unlimited but max amt allowed
Open
Green Dot
Corporate GiN & IncenPve
Employers
Once
Open
CiPbank Prepaid, Carlson MarkePng
Government Disbursements
Government
Varies
Both Open & Closed
SSN, WIC, Disaster Relief, EBT
Instant Issue GiN
Retail
Once; somePmes unlimited
Both Open & Closed
Simon Mall
Travel
Retail, Banks, Employers
Unlimited
Open
Travelex MasterCard
* Prepaid cards are defined by their distribution, load method and network
PREPAID CARD ATTRIBUTES • •
Closed loop cards can have any number of digits but don’t fall into a branded BIN range Open loop cards have BINs - Older cards; may not be traceable - Newer cards: are traceable because of Durbin
•
Older cards have stricter expiraPon ranges; newer cards can have 10 years
•
All of these cards can be used online
•
Older cards may or may not have CVV2
TRENDS
THE e-GIFT CARD MARKET IS GROWING RAPIDLY
The dollar volume of virtual gi1 cards will grow from less than a half-‐billion dollars in 2010 to nearly US$10 billion in 2015. -‐Aite Group
A recent survey found that 51% of gi> card vendors offer instant online delivery, that’s up 10% since last year. -‐Bankrate.com “Although electronic and virtual P2P gi1ing providers would love to replace all paper-‐based payment methods, that is not going to happen in the short term…There are, however, customer segments that are ripe for migraHon to virtual gi1ing soluHons —these segments, in aggregate, represent US $25 to US $30 billion in paper-‐based P2P gi1ing.” -‐ Aite Group
BANKS ARE ADDING PREPAID ISSUING • • •
Eleven Banks Sign on with i2c since October In under 45 days, together these banks manage 23 different prepaid programs marketed to consumers across the United States i2c’s new bank clients will leverage such features
- Digital coupons and mobile soluPons to increase acPvaPon rates - Drive usage and extend card life for their payroll - GiN and GPR programs “Banks have realized the strategic value of offering prepaid products,” said Amir Wain, i2c CEO.
VIRTUAL CARDS IN EUROPE • • •
Transact Network and Ixaris to Issue Virtual, PlasPc Prepaid Visa Cards The deal marks Transact Network’s first large-‐scale Visa implementaPon since announcing its ability to offer services through Visa Europe As one, the company can now offer increased choice and flexibility to exisPng and new program managers
“Given the success of the partnership with Transact Network, it was only natural to expand our relaHonship to include virtual and plasHc prepaid Visa products,” said William Lorenz, banking director, Ixaris.
COMPANIES THAT PROVIDE DIGITAL GIFT CARDS
BENEFITS OF e-GIFTING •
Consumers want it
• Immediate fulfillment, thus increasing retail sales • It is a more secure method of delivery because no cerPficate is shipped and a new card can be easily reissued
• It reduces shipping and handling costs for business • It saves Pme • It can work with exisPng giN cards or cerPficates
PREPAID CARD FRAUD
NEGATIVE BALANCES • •
NegaPve Balances do and will happen with Prepaid Cards How? – Consumer improper usage – eCommerce improper usage – Fraud – Merchant coercion – Mules
CONSUMER •
Consumers do not know who to use prepaid cards properly
•
Balances are not readily available
•
POS systems do not support parPal authorizaPon – MasterCard & Discover mandated reversals April/May 2010 * • Includes JCB and Diners Cards
•
RaPonale: - - - -
Consumer do not always know their available balance on card Consumer try to spend more than available balance on card TransacPon is declined and addiPonal fees are charged When transacPon is in progress but not completed -‐ the available balance on the card is temporarily reduced unless merchant reverses the authorizaPon
*Merchants are required to support reversals with the excepPon of those that exclusively process transacPons via batch uploads, mail order/telephone order (MOTO), or recurring payment transacPons .
RECOMMENDATION •
eCommerce merchants should support both parPal authorizaPons, balance inquiries and reversals for all card types
•
This would improve the consumer experience and reduce fraud
•
RaPonale: – Prepaid cards are NOT going away!!
PREPAID FRAUD •
Happens in the same ways as credit card fraud – Stolen card numbers – Unauthorized “friendly” use – eCommerce fraud – Merchant coercion – ID TheN (example: taxes)
•
How's it different? – There are no standard fraud monitoring tools – There are no typical use paoerns – Load fraud
SPECIFIC PREPAID DATA BREACHES •
•
FIS – FIS earnings statement for the first quarter of 2011 revealed that it suffered an intrusion on its eFunds Prepaid SoluPons plaporm in May 2011 – 7,170 prepaid accounts were at risk and three individual cardholders’ non-‐public informaPon may have been disclosed as a result of the breach WorldPay – $9M was taken from prepaid accounts in August 2007 – Mules retrieved cash from ATMS internaPonally – Alerts were received but cards were not turned off fast enough because of the quickness of the withdrawals – The ring leader was arrested and prosecuted
MONEY PAK •
Released by Consumer Fed OrganizaPon Dec 2011 – Scam # 1 -‐ Consumer sees a great deal while shopping online, follows the crook’s instrucPons to pay via MoneyPak, and never receives the item – Scam # 2 -‐ The crook claims that the consumer has won a sweepstakes or looery – To claim the prize the consumer is told to pay taxes or other fees using MoneyPak – The scammer gets the MoneyPak number from the vicPm, transfers the funds to a prepaid card, and cashes it in at an ATM – Prize is never received by consumer
MULES • • •
Mules are on the rise Prepaid card usage can be anonymous and untraceable Crooks can use prepaid cards as payment for mules
BEST PRACTICES
BEST PRACTICES •
Velocity limits
•
Load limits
•
ReporPng to common agencies & law enforcement (example: NCFTA)
•
Issuers can look for behavior paoerns
•
Coming together as an industry to prosecute & having a unified approach
