By Loraine DeBonis, Marketing & Communications Director
I’ve only missed one Power of Prepaid Conference. It was 2014. I was about to have twins and neither the FAA nor my doctor would let me near an airplane.
Every other year since the conference began in 2012, I’ve made the trip to D.C. It’s always worth it, and last week’s show was no exception.
What keeps me coming back year after year is simple: the people. Yes, the topics are important to our business. We must stay on top of regulatory issues affecting us, our issuing bank and program manager partners, but our membership in the Network Branded Prepaid Card Association (NBPCA) assures that we do that anyway.
What makes the conference special—and well worth taking the time out of the office—is reconnecting with the people who built the prepaid industry and who continue to shape its course. The passion with which these individuals approach their work is as infectious and inspiring as anything you’ll find at a fintech event.
You’ll also find new entrants to the market like Lyft, whose Head of Payments and Fraud, Ashwin Raj, described prepaid during his address as “critical to growth” for the ride-hailing service.
Even in this unpredictable spring weather, D.C. offered two things you can’t find anywhere else—cherry blossoms and proximity to the Hill. The former was beautiful, even in the cold weather, and the latter meant that we got to hear directly from regulators and lawmakers—and they got to hear from us.
Below are my key takeaways from this year’s Power of Prepaid. I hope to see you there next year.
1. Certainty Is Not Quite Certain
The prepaid industry has been waiting for six years for the CFPB’s final rule on prepaid accounts to be settled. And while nobody wants a bad rule rushed, the uncertainty of what the regulations ultimately would be has kept us in a bit of a holding pattern.
Now with an effective date 12 months out, some speakers and attendees were hopeful that the industry could finish its compliance implementation plans and finally focus attention elsewhere.
But other legal experts suggested that with new leadership at the bureau and one of its many RFIs focused on adopted regulations, the CFPB’s “final rule” on prepaid accounts may be up for grabs—or at least parts of it.
James Kim, of counsel at Ballard Spahr, encouraged attendees to respond to the CFPB’s RFI on adopted regulations. Of particular importance: The fact that the rule creates an uneven playing field for prepaid overdraft by triggering Reg Z requirements that traditional checking accounts don’t have to meet. He and his colleagues take a closer look at the topic in an April 10 post on the firm’s Consumer Finance Monitor blog.
Acting CFPB Director Mick Mulvaney’s chief of staff spoke in a closed-door session, which means I can’t tell you what she said, but I can say that attendees came away feeling like the bureau welcomes industry input.
2. The Credit Conundrum
The final rule’s Reg Z triggers for any type of credit linked to a prepaid account has put a damper on the industry’s pursuit of innovative credit features. What’s more, everyone from Suze Orman to issuers to the card networks has tried to figure out how to use prepaid transactional data to underwrite customers. Unfortunately, we haven’t seen much progress on that front.
Meanwhile, the need for new approaches to underwriting hasn’t gone away. What’s more, prepaid providers are competing fiercely to improve retention. To that end, there has been some headway with the likes of Green Dot, Walmart and Netspend offering rewards on their GPR products. But solving short-term cash flow problems for cardholders could be a huge boon to prepaid card providers, as long as it doesn’t get them into regulatory trouble.
During a panel on designing products for people of color, Miguel Zepeda, head of North America payments at Brinks, said that a poor credit score is the biggest pain point for his cardholders. Although the company makes no claims about helping customers build credit, what Brinks has found is that customers using the prepaid card tend to improve their credit scores over time.
“We’re a long way off from prepaid being a direct credit-builder,” NBPCA’s Chief Operating Officer Ben Jackson told me after the show. “But, prepaid can be an indirect credit-builder by helping cardholders budget, manage their money and pay bills on time.
“Nobody knows how to factor prepaid data straight into a lending model,” he added. “We need new lending models to be built.”
3. The Rise of the IPA
Perhaps the prepaid industry can look to the broader fintech space to help solve the problem of credit access. Or, maybe the combined creativity of prepaid pioneers and fintech startups can lead to financial services products we have yet to imagine.
Whatever the future of prepaid holds, innovation requires collaboration, Mastercard’s Head of Prepaid and Inclusive Growth Solana Cozzo told attendees during her keynote on Wednesday.
“We’re only limited by our perceptions,” she said, noting that prepaid is more than gift cards or products for underserved consumers.
“Prepaid is an enabler of innovation,” she said.
With prepaid accounting for only about 5 percent of card spend in the U.S., according to Federal Reserve data, the industry has plenty of room to grow. And that growth, according to experts at the event, is likely to come from new features, new products, new channels (IoT) and new partners.
That’s what excites me about the next 12 months and next year’s conference. Between now and then, the NBPCA will be changing its name to the Innovative Payments Association, a change it announced on day one of the conference. I think it’s long overdue.
The NBPCA has done tremendous work raising the profile of the prepaid industry and advocating in Washington and at the state level—remember New Jersey? But the name Network Branded Prepaid Card Association doesn’t exactly role off the tongue.
Prepaid has always been an innovative payment type. And with so much investment and new ideas in payments right now, I can’t wait to see who will be helping us build the next generation of innovative prepaid payments.
Let’s raise a glass to the forthcoming IPA.
Loraine DeBonis is the marketing and communications director for Ubiquity Compliance Solutions, which specializes in dispute and chargeback management, fraud and identity verification services for the financial services sector. She served on the board of the NBPCA from 2015-2017 and spent 10 years writing about prepaid and emerging payments for SourceMedia and Paybefore. She can be reached at email@example.com.