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Prepaid Cards & eCommerce - eandsconsultingllc.com · Unlimited Open Travelex(MasterCard * Prepaid...

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Prepaid Cards & eCommerce Presenter: Lori Breitzke, President Date: Tuesday, January 10, 2012 Location: AECF OVER 25 YEARS OF SUCCESSFUL PRACTICE
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  • Prepaid Cards & eCommerce

    Presenter: Lori Breitzke, President Date: Tuesday, January 10, 2012 Location: AECF

    OVER 25 YEARS

    OF SUCCESSFUL

    PRACTICE

  • 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

  • OPEN LOOP

    Carries network logo

    Sold in bank branches, internet, malls, retail

    Issued by a bank - Regulated by state/federal government

    Can be used anywhere network accepted

    Typically consumer pays a small fee for the purchase of the card

    Card has some type of consumer service fees

    Examples: SIMON mall gift card, Staples Visa Rewards

    DIFFERENT TYPES OF PREPAID CARDS

    PRIVATE LABEL

    Open network but restricted access

    Does not carry network logo

    Can be used within specific stores only

    Typically consumer only pays for the face value of the card

    Typically card has no consumer fees

    Issued by a bank - Regulated by state/federal government

    Examples: AT&T Wireless, Spa Escapes, Marriott Hotels

    CLOSED LOOP

    Store or mall logo

    Can be used within specific stores only

    Typically consumer only pays for the face value of the card

    Typically card has no consumer fees

    Regulated by state government

    Issued by a retailer

    Examples: Best Buy, Home Depot, Joes Pizza Place

  • CONSUMER GIFT

    Has short-term expiration date

    Sold in bank branches, internet, malls, retail

    Card can not be reloaded; initial load is consumers money

    Generally, card has purchase fee but no ongoing consumer fees

    Issuer can not attempt to recoup ECV

    Issued by bank; processed by 3rd parties

    Example: SIMON mall gift card

    DIFFERENT TYPES OF PREPAID CARDS

    B2B INCENTIVE

    Has shorter-term expiration date

    Is given to the consumer as a reward, rebate or incentive

    Card can not be reloaded; initial load is corporate funds

    No fees to the consumer

    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

    CONSUMER GPR

    Has longer-term expiration date

    Can be sold in bank branches, retail stores or given to employees as payroll card

    Card is reloadable by consumer and/or employer

    Typically consumer pays purchase, monthly and reload fees (not direct deposit)

    Issuer can not attempt to recoup ECV

    Issued by bank; processed by 3rd parties

    Example: Money Card by Green Dot, Univision

  • 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 dont 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

    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 termThere are, however, customer segments that are ripe for migraHon to virtual gi1ing soluHonsthese segments, in aggregate, represent US $25 to US $30 billion in paper-based P2P gi1ing. - Aite Group

    A recent survey found that 51% of gi> card vendors offer instant online delivery, thats up 10% since last year. -Bankrate.com

  • 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

    i2cs 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 Networks 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 crooks 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


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