One of the most exciting innovations that came out of Apple’s WWDC 2017, was the “Venmo competitor” Apple Pay Message that is built on a digital debit card called Apple Pay Cash. APC is powered by prepaid leader Green Dot and is the latest deployment of a virtual prepaid account. In 2016 Square launched a virtual prepaid debit account linked to the Square Cash app as a key element of it’s evolving payment strategy.
And the trend toward virtual is not just for prepaid. China Union Pay has announced the UnionPay Cloud Quick Pass QR payment system which allows a customer to make a payment by presenting a QR code rather than a plastic card. And traditional FIs like Wells Fargo, Chase and Bank of America are rolling our cardless ATMs to allow accountholders to get cash without their debit card.
What is the common tread across all these developments? Mobile Apps. With the US smartphone penetration exceeding 80 percent, mobile solutions are the future and businesses everywhere are embracing ways to take cardless payments.
So the cards in your wallet are about to go the way of the dodo, right? Not anytime soon.
NFC, QR codes and temporary PINs have been around for a while and are only operational in a few million of the 100’s of millions locations that accept EMV and Mag Stripe plastic cards worldwide. But a virtual prepaid account makes a lot of sense for some important verticals.
Incentives, Rebates & Rewards
Businesses send out millions of one-time payments every year and prepaid cards have become the predominate solution. When Maytag sends out a $500 rebate prepaid card they enjoy both marketing exposure and cost savings versus sending a check. Those benefits far outweigh the cost of the plastic card. But if a retailer wants to send a $10 thank you to customers or a health care provider needs to refund a $30 co-pay, then a virtual prepaid account is much more cost effective than a physical card. The recipient can use it to shop online, get cash at a cardless enabled ATM or even get cash back at select retailers.
Travel & Entertainment
If an employee travels a lot then it makes sense to provide them a prepaid or credit card to cover expenses. However, many employees only travel a few times a year and they don’t want to use their personal cards. A virtual prepaid account can be used to pay for hotels, seminars, etc. And when linked to a mobile account they can be used at locations that accept NFC, QR codes and temporary PINs. So why incur the cost of issuing a physical card when a virtual account can meet the need?
Mobile Apps and Direct to Consumer
Marketing directly to prospective prepaid customers can be very productive but it is costly. Sending out plastic cards that are never loaded is an expensive proposition. Even when you have a cardholder actively select your prepaid card online, the need that drove that decision often fades by the time the physical card arrives 2 weeks later. By offering a virtual account that can be funded immediately from a bank account or a Green Dot Money Pak, then you can meet the immediate need and increase the probability that the customer will continue to use the account when the plastic arrives.
For Mobile First consumers, a virtual account with an optional prepaid card may be the best solution. The user has already chosen an app that they trust for other purposes, so by adding a virtual prepaid account, they now have a solution for in-app purchases, paying bills and shopping online. And if they want a physical card, they can request one once they see the value of using a prepaid account as a primary or supplemental financial tool.
The plastic prepaid card will continue to be a popular payment form factor. We will see enhancements like EMV and contactless migrate from credit cards to prepaid debit. But virtual prepaid accounts have come of age. As companies look for ways to reduce expenses, implement better controls and implement faster payments, usage of virtual accounts will continue to grow.
Interested in developing a virtual card strategy? Drop me a note at email@example.com