October/November 2002 Issue Focus: Unique Delivery Systems

Reloadable Stored Value Cards Offer New Relationship and Revenue Opportunities

You can use a stored value card for everyday purchases like gas and groceries, you can use it at retailers and restaurants, or you can even send one as a gift. As people become more familiar and consequently more comfortable with stored value cards, you see them everywhere, from doctor’s offices and pharmacies (medical savings accounts), to the Internet, where virtual stored value cards create security for Internet transactions.

New offering for commercial customers

But the appeal of stored value cards is not just to the cardholder. For your commercial customers, stored value cards can mean reduced costs and greater efficiencies.

One example of a rapidly increasing use of stored value cards by commercial customers is payroll cards, which allow employers to make non-paper direct payroll deposits for employees, whether those employees have existing banking relationships or not.

For the more than 20 million people in the United States without a bank account, payroll cards can provide immediate access to wages, without incurring the cost of using a check-cashing service and the potential risk of taking the entire amount in cash.

Each pay period, wages are loaded to an employee’s payroll card, which can be a Visa®, Signature Based Card®, or ATM card carrying the logo of the financial institution or employer. Then, the employee has the flexibility of a debit/ATM card and can withdraw a specified amount from an ATM, or use the card wherever Visa or Signature Based Card is accepted to buy everything from groceries and gasoline to tennis shoes and Chinese takeout.

Payroll cards can be established as reloadable cards for ongoing payroll payments, or as single-load cards for one-time payments. The cards are an attractive option for companies that process payroll and for financial institutions that provide banking and payroll services to their commercial customers.

Financial institutions of any size can easily adapt the payroll card for use with commercial clients ranging from small to large companies, government agencies, or franchised firms such as those in the hospitality, retail, or fast-food industries.

• Revenue expansion — issuing payroll cards generates additional revenue through interchange fees on purchase transactions
• New market opportunities — a new offering for the “unbanked” customer
• Reduced expenses associated with paper payroll processing
• Fewer non-customers in the lobby for check cashing

For employers, payroll cards offer multiple benefits, including:

• Reduced check, printing, distribution, and processing costs
• Reduced payroll shipping costs
• Elimination of check fraud
• Elimination of costs associated with lost or stolen checks
• Improved payroll account management
• The ability to instantly issue bonuses, final paychecks, etc.

Opportunities to attract new customers

Stored value cards can also present opportunities to create new, lifecycle-banking relationships, and expand existing ones.

With the Visa Buxx™ stored value card, a parent holds the account, while the teen is the authorized user. Parents can apply for the card online, then load (or unload) funds, view transactions, obtain balance information, and view detailed electronic statements, which also are available to the teen cardholder.

Last year, American teenagers spent $165 billion on clothes, music, and entertainment, yet many have parents who, while making spending money available to them, also want to teach them practical money management skills.

With Visa Buxx, teenagers have a safe, controlled way of accessing cash while learning responsible spending habits, while the issuing financial institution gains a new relationship with the cardholder, and a strengthened relationship with the parents.

For financial institutions, the Visa Buxx card means:

• Stronger relationships with existing customers (parents)
• New relationships with teenage cardholders
• Opportunities to earn additional interchange for every signature merchant purchase
• Revenue opportunities from card and transaction fees and from cross-selling and up-selling other bank products to parents and teens

Stored value cards combine the accessibility and acceptance of Visa or Signature Based Card, the convenience of debit cards, and the simplicity of cash. They are safer than cash, more convenient and more accepted than checks, and easier to obtain and more private than credit or debit cards.

Stored value cards can expand your offerings to customers, create opportunities for new banking relationships, strengthen existing ones, and increase revenue. And they are one of the newest offerings for financial institutions that want to offer their customers the next generation of payment tools.