Prepaid Debit

A Real Solution For Credit Unions A Real Solution For Credit Unions

January 31, 2008January 31, 2008

Presented by: Patty SmithPresented by: Patty Smith

Topics of Discussion What is a Prepaid Debit Card?What is a Prepaid Debit Card?

How does it work?How does it work?

Why would my members want one?Why would my members want one?

Who is offering them?Who is offering them?

Topics of Discussion

Why should I care?Why should I care?

What’s available to me?What’s available to me?

What do I need to know to offer them?What do I need to know to offer them?

Prepaid is a Debit CATEGORYPrepaid is a Debit CATEGORY Account or Card is PRE FundedAccount or Card is PRE Funded Transactions are authorized and posted Transactions are authorized and posted against the Card Balance, NOT a DDA or Checking against the Card Balance, NOT a DDA or Checking

AccountAccount

*Stored Value – Europe – Rest of the world VALUE is on PLASTIC not Card Account*Stored Value – Europe – Rest of the world VALUE is on PLASTIC not Card Account

What is a Prepaid Debit Card?

Non Reloadable - Typically Instant IssuedNon Reloadable - Typically Instant Issued Gift – One Time UsageGift – One Time Usage Closed Loop and Open Loop – Branded Closed Loop and Open Loop – Branded

Reloadable – Typically PersonalizedReloadable – Typically Personalized Multiple Use – Ongoing RelationshipMultiple Use – Ongoing Relationship Open Loop – BrandedOpen Loop – Branded

Card Categories

Reloadable: Segment Market General Purpose Cards General Purpose Cards

Everyday Spending Everyday Spending Travel Cards Travel Cards

Alternative to Travel ChequesAlternative to Travel Cheques Payroll CardsPayroll Cards

Provides alternative to traditional payroll Provides alternative to traditional payroll Set up and managed by company’s FISet up and managed by company’s FISaves money over traditional meansSaves money over traditional means

Family / TEEN CardsFamily / TEEN CardsParental Control and MonitoringParental Control and Monitoring

Prepaid Debit Overall The 3The 3rdrd Evolution of the Card Payment Evolution of the Card Payment

Business: Business: Credit Credit - Pay Later- Pay Later Debit Debit - Pay Now- Pay Now Prepaid Prepaid - Pay Before- Pay Before

The fastest growing payment form in 20yrs!The fastest growing payment form in 20yrs!

Prepaid Debit - Mainstream 2007 Year End Estimates2007 Year End Estimates

Greater than 7 Billion TransactionsGreater than 7 Billion Transactions Over $175 Billion Dollars SpentOver $175 Billion Dollars Spent Prepaid revenues for Visa/MasterCard will exceed Prepaid revenues for Visa/MasterCard will exceed

$1.35 billion by 2010 – largest payment segment $1.35 billion by 2010 – largest payment segment Overall Awareness of Product – 75% with a greater Overall Awareness of Product – 75% with a greater

than 90% satisfaction ratio. than 90% satisfaction ratio. * Network Branded Prepaid Card Association* Network Branded Prepaid Card Association* Edgar, Dunn & Company 9/07* Edgar, Dunn & Company 9/07

Easy to understand and use for ConsumersEasy to understand and use for Consumers Accepted and works like a reg Debit CardAccepted and works like a reg Debit Card

Funds can be accessed via ATM, PIN POSFunds can be accessed via ATM, PIN POS and Signature Channels – VISA / MCand Signature Channels – VISA / MC

Cardholder determines spending limitsCardholder determines spending limitsHow much to put on and whenHow much to put on and whenCards can be re-loaded as neededCards can be re-loaded as neededImproved Budgeting and ControlImproved Budgeting and Control

Benefits of Prepaid

Benefits of Prepaid ConvenienceConvenience ControlControl SecuritySecurity PrivacyPrivacy

PLASTIC IS KING!!

Marketplace – Who is offering? Green Dot Green Dot H&R Block H&R Block Retailers:Retailers:

Wal-MartWal-Mart TargetTarget

Credit Card Issuers – Capital OneCredit Card Issuers – Capital One

GREEN DOT First ever Prepaid cards sold at neighborhood First ever Prepaid cards sold at neighborhood

retailers with worldwide MasterCardretailers with worldwide MasterCard® ® Debit or Debit or

VisaVisa®® Debit and ATM acceptance Debit and ATM acceptance Green Dot - EverydayGreen Dot - Everyday Green Dot - Uso Diaro Green Dot - Uso Diaro (customized for Spanish-speaking customers)(customized for Spanish-speaking customers)

Green Dot - Student Green Dot - Student

GREEN DOT Costly for ConsumersCostly for Consumers

$9.95 avg Retail$9.95 avg Retail $2.50 - $4.95 avg Load Fee$2.50 - $4.95 avg Load Fee $2.50 ATM w/d$2.50 ATM w/d $4.95 Monthly Maintenance$4.95 Monthly Maintenance

Avg Annual Cost to Cardholder: $210 per CardAvg Annual Cost to Cardholder: $210 per Card

* Initial cost NOT included – Estimated 2 loads per month @ $2.50 + 3 ATM w/d a month* Initial cost NOT included – Estimated 2 loads per month @ $2.50 + 3 ATM w/d a month

H&R Block - Emerald SavingsTM

Prepaid MasterCardPrepaid MasterCard Available to tax clients only Available to tax clients only Tax Refund automatically loaded onto cardTax Refund automatically loaded onto card Can accept direct depositsCan accept direct deposits Can be re-loaded via Money Gram, Green Dot, Can be re-loaded via Money Gram, Green Dot,

Western UnionWestern Union Fees VaryFees Vary Additional Savings & IRA Accounts offeredAdditional Savings & IRA Accounts offered

Wal-Mart and Target 2 of the 5 largest Retailers on the band wagon!2 of the 5 largest Retailers on the band wagon!

Collectively : $150 Billion in Annual Revenues Collectively : $150 Billion in Annual Revenues Prepaid “Debit” Cards Cross Sold at check outPrepaid “Debit” Cards Cross Sold at check out Immediate discounts applyImmediate discounts apply Additional Savings for future purchasesAdditional Savings for future purchases Accepts Direct DepositsAccepts Direct Deposits NO NEED TO OPEN NEW CHECKINGNO NEED TO OPEN NEW CHECKING Moving toward - Decoupled: Transactions ACHed to FIMoving toward - Decoupled: Transactions ACHed to FI

Capital One – Decoupled Cards No need to open NEW checking or move No need to open NEW checking or move

Direct DepositDirect Deposit Debit Transactions are ACHed to Cardholder’s Debit Transactions are ACHed to Cardholder’s

checking account dailychecking account daily Typically Pre-ApprovedTypically Pre-Approved Automatic offers to Credit CardholdersAutomatic offers to Credit Cardholders

IMPACT TO CREDIT UNIONS Loss of Debit Interchange IncomeLoss of Debit Interchange Income

Loss of Deposits - Deposit IncomeLoss of Deposits - Deposit Income

Loss and Erosion of Checking Account Loss and Erosion of Checking Account Base and PFI RelationshipsBase and PFI Relationships

Ignoring Prepaid Debit: The biggest threat our Industry has seen to date: The biggest threat our Industry has seen to date:

18.8% of CU’s Non-Interest Income comes 18.8% of CU’s Non-Interest Income comes from Debit Interchangefrom Debit Interchange

Total Non Interest Income 2Total Non Interest Income 2ndnd qtr 2007 qtr 2007

$4.8 Billion$4.8 Billion

*Callahan’s 2007 Non-Interest Income Survey*Callahan’s 2007 Non-Interest Income Survey

John F Kennedy, April 12, 1959

The Chinese use two brush strokes to write The Chinese use two brush strokes to write the word “CRISIS”. One brush stroke stands the word “CRISIS”. One brush stroke stands for DANGER; the other OPPORTUNITY.for DANGER; the other OPPORTUNITY.

In a crisis, be aware of the danger – but In a crisis, be aware of the danger – but recognize the opportunity.recognize the opportunity.

Deciding WHAT to offer Convenience Services: Not a Main ProductConvenience Services: Not a Main Product

Gift CardsGift Cards Travel CardsTravel Cards

General Purpose: Main ProductGeneral Purpose: Main Product New Markets – Unbanked, Niche MarketsNew Markets – Unbanked, Niche Markets Growth in current products Growth in current products

Supports Credit and DebitSupports Credit and Debit Maintains current DDS Base and Direct DepositsMaintains current DDS Base and Direct Deposits

Deciding WHAT to offer CUSTOM ProgramsCUSTOM Programs

CU Manages Program- Plastics, load sites, CSCU Manages Program- Plastics, load sites, CS CU Assumes All Risk – Fraud, Overages, etc..CU Assumes All Risk – Fraud, Overages, etc.. CU Earns All Income – purchase, loads, breakageCU Earns All Income – purchase, loads, breakage

Agency ProgramsAgency Programs CU Partners with Proven ProviderCU Partners with Proven Provider No Risk – No LiabilityNo Risk – No Liability CU Earns Partial Income – purchase, monthly fees,etc CU Earns Partial Income – purchase, monthly fees,etc

CU MONEY – Everyday Money $500 Implementation Fee – $500 Implementation Fee – Waived thru 3/31Waived thru 3/31 Price to CU: Price to CU: $2.00 $2.00

CU Sets Price to Member - $3.95 to $5.95 avgCU Sets Price to Member - $3.95 to $5.95 avg CU Monthly Support Fee: $50 – CU Monthly Support Fee: $50 – Waived 1Waived 1stst 6 months 6 months

CU Earns $.50 per active card CU Earns $.50 per active card FREE Internet Site FREE Internet Site 4 FREE Monthly Customer Service Calls4 FREE Monthly Customer Service Calls Unlimited LoadsUnlimited Loads Loads and Monthly Fees to Members significantly lower than Loads and Monthly Fees to Members significantly lower than

competitioncompetition CU can CU can customize customize with their LOGOwith their LOGO

CU MONEY – VISA Travel Money $500 Implementation Fee – $500 Implementation Fee – Waiver Extended thru 3/31Waiver Extended thru 3/31 Price to CU: Price to CU: $2.00 $2.00

CU Sets Price to Member - $3.95 to $7.95 avgCU Sets Price to Member - $3.95 to $7.95 avg No Monthly Fees for CUNo Monthly Fees for CU No inactivity fee for 1No inactivity fee for 1stst 11 months for member 11 months for member FREE Travel EnhancementsFREE Travel Enhancements FREE Internet Site FREE Internet Site 4 FREE Monthly Customer Service Calls4 FREE Monthly Customer Service Calls Loads and Foreign Currency Exchange Rate to Members significantly lower Loads and Foreign Currency Exchange Rate to Members significantly lower

than competitionthan competition CU can CU can customize customize with their LOGOwith their LOGO

CU MONEY – Gift Cards

NO START UP COSTNO START UP COST Price to CU: $1.25Price to CU: $1.25

CU Sets Price to Member - $2.50 - $3.50 avgCU Sets Price to Member - $2.50 - $3.50 avg Unlimited Website and VRU accessUnlimited Website and VRU access One Time Use – NO RELOADs One Time Use – NO RELOADs NO ATM AccessNO ATM Access

CU MONEY – 2008 Additions

Payroll Card Payroll Card

Family CardFamily Card

CU MONEY Prepaid Debits

For ConvenienceFor Convenience For ServiceFor Service For GrowthFor Growth For your Future………………….For your Future………………….

Prepaid Debit

A Real Solution For ALL Credit A Real Solution For ALL Credit Unions!! Unions!!