Prepaid cards are the “apps” of the card world. Join George and Fiserv’s Head of Prepaid Dom Morea as they introduce prepaid’s twin modalities - open loop and closed loop - and then dive into how the gift card industry has morphed into a far broader set of uses cases. And plan to return for the next episode as they discuss open loop’s evolution.

Card payments have four modalities:

• Charge Cards. There are charge cards that are a form of very short term credit, you pay off in full the monthly statement
• Credit Cards add the option of revolving all or a portion of the debt obligation and, if you do, you pay interest on those charges

Both of these are products that we buy as consumers or businesses. And we’re paying with money we don’t have at the moment of the transaction. They are “pay after” products.

• Debit Cards. Debit Cards, on the other hand, are a feature of a specific checking account. It draws on funds that are available right now. It’s a “pay now” method. As soon as the issuer authorizes the transaction, a hold for that amount is placed on funds in your account.
• Prepaid Card. The final modality operates in “pay before” mode. That’s the prepaid model where funds have been placed in an account to be spent at a later date. Like debit, prepaid draws on funds that are already in place. In most cases, the prepaid funds owned by an accountholder are pooled in a single bank account.

Prepaid is used in two different manners

1. Open loop prepaid cards are network branded (think Visa and Mastercard). They can be used anywhere the network’s cards are accepted.
2. The second approach is closed loop. This is the domain of the gift card where a merchant has pre-sold an obligation to provide goods or services up to the value in the prepaid account.

Prepaid Use Cases Abound

Prepaid is big business. Go into any chain drugstore and you’ll see a rack with both open and closed loop prepaid cards for sale. For years, the physical footprint of that “prepaid mall” has been the most profitable square footage in the store.

The prepaid world has some very interesting dynamics. Unlike credit card products that may be issued to millions of cardholders and used for all kinds of purchases, a prepaid program may only serve a few thousand and may be locked down for special purposes.

The Apps of Cards

That’s why we think of prepaid as the “apps” of the card world. Prepaid lends itself to some very specific use cases and program types.

In this first of two interviews with Dom Morea, Fiserv’s Head of Prepaid, we cover closed loop prepaid and some of the new and growing use cases Fiserv has supported, often driven by COVID-19.

Here’s Dom discussing B2B use cases for closed loop prepaid programs:

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In our payments education workshops, we make the point that today’s fintechs rarely do something entirely new. At the macro level, our activities and the transactions they produce haven’t changed. We buy food and clothing. We pay rent.

But where and how we do these things has been transformed by technology.

A Great Time to Be a Fintech

Fintechs are the newer, nimbler businesses that are most often changing how we do things. We buy tickets online, get takeout using our mobile phones, and file insurance claims via an app.

Fintech entrepreneurs are busting old processes with much improved user experiences and “value for money” propositions.

It’s a great time to be a fintech.

The building blocks are in place. Powerful cloud-based capabilities are common. APIs connect these tools. Rich data and machine learning generate specific, actionable insights. iOS and Android give smartphones super powers. Business models like payment facilitation help some fintechs. You can even become a bank.

Multiplayer Fintech Builds a Winning Service

Individual fintechs are partnering with others to develop and deliver compelling new services. This is multiplayer fintech. Think of it as the fintech supply chain. The direct provider of services to the customer uses the specific payments capabilities of other fintechs to expand and strengthen what it delivers to its customers.

This approach lets the provider get to market faster with better capabilities than its competitors. That builds a competitive moat for a period of time. And expands the company’s revenues through a broader range of services.

Not Always Easy in B2B

The ability of these fintechs to displace incumbent vendors and processes (“How we’ve always done it”) can be hindered by the target company’s size and reliance on legacy systems. Their complexity presents a barrier. Dismantling it can take a lot of time and change management process support.

For mid-sized firms, however, the choice to shift to cloud-based service delivery is fast becoming a no-brainer. The work from home imperative has only accelerated the decision.

Prospering Despite COVID

We all know that the Travel and Hospitality industries have taken a COVID-inflicted beating. But not every company serving those needs has suffered.

TripActions, focused on corporate travel, just raised $155M at a $5B valuation to help enterprises analyze travel and expense data.

Join TripActions’ Robin Gandhi and George as they talk about how TripActions has prospered in the last year with its travel expense management service that makes both the COF and the employee smile.

TripActions has employed those building blocks and partnerships with firms like Visa, Stripe, and Modern Treasury. Using the multiplayer fintech approach, TripActions now has a service that has rewritten how an enterprise manages its travel and expense management processes. For the employee, the hated expense report submission process can be virtually eliminated.

TripActions’ services could not have been built even five years ago. Without today’s technical building blocks and those partner-provide capabilities, TripActions could not have built its services and hit the market as it has.

It’s a good time to be a fintech.

Here’s Robin talking about multiplayer fintech: 

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GPay is Google’s app for payments, financial services, rewards, and, is expanding its capabilities, its partnerships, and its ambitions. Join Glenbrook’s George Peabody and Yvette Bohanan as they talk GPay with Steve Klebe, Google's head of GPay business development and Google's Processor and Partnerships work.

Fairly recently, Google’s payments services were a disjointed collection of point solutions. Today’s GPay is far more than a rebranding job. Listen between the lines to what Steve has to say. The implications are many.

Way More Than a Wallet

A lot has happened since Steve joined us in July 2019.

GPay has added incentives and loyalty more deeply as well as added expense management with automatic receipt discovery when sent to your Gmail account or via the camera. The incentives can turn into real money.

In the U.S. Google has teed up its Plex bank account offerings in partnership with Citi and Stanford FCU (other FIs to come) for launch in 2021. You can already add bank accounts to GPay through Google’s partnership with Plaid.

GPay is becoming a very competent user interface to the banking services offered by the FIs themselves. Google provides the UX and the data that matters. The bank does what it does.

Does this disintermediate the banks or give them a new channel through which they can offer their services? We will decide but personal experience suggests the GPay interface has a lot going for it.

Google has added these new capability and consolidated others under the single GPay roof. Its ambitions now go beyond simply being a repository for payment credentials and loyalty cards with a sprinkling of P2P payments on top.

Exercising Open Banking

One of the major payments and fintech trends for 2021 is open banking, the ability of third parties to access accountholder data.

PSD2 has driven this in Europe and India’s Unified Payment Interface (UPI), both pushed by mandate, enables a vigorous open banking ecosystem in that country. Google Pay, formerly Tez, has been a huge success in India. Of course, market pressure is the driver in the U.S.

Google is now exploring the potential for GPay to assume the role of "super app" along the lines of WeChat Pay or Alipay. Yes, that’s a big leap but there are hints of its ambitions. For example: Google has built over 100 HTML games optimized for low bandwidth networks and low memory smartphones, all targeted toward supporting its NBU (Next Billion Users) effort. GPay will be one of the presentation surfaces for these GameSnack.

Fairly recently, Google’s payments services were a disjointed collection of point solutions. Today’s GPay is far more than a rebranding job. Listen between the lines to what Steve has to say. The implications are many.

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