Mobile Phones and Multi-Merchant Prepaid Cards – A Perfect Match?
July 31, 2012
Prepaid cards primarily come in two types: closed-loop cards that can only be used at one issuer’s stores, and open-loop cards that can be used anywhere the brand on the card is accepted. There is a third type, and that is the Restricted Authorization Network card or RAN card. This type of card can be used at more than one merchant, but it has restrictions on where it can be used. The restriction may be for a specific group of merchants, a particular merchant category code, or for a certain type of product.
One struggle that RAN card program managers have is educating their customers on where the cards can be used. For example, many of these cards are limited to a particular geographic area as a way of encouraging cardholders to patronize local businesses. But not every business in that area will accept the cards, so how is a cardholder to know where to go?
Right now the answer may be that a list is printed on the card or on an accompanying package. But that is an imperfect system because the card may need to carry some other promotional message or be too small for a list, and separate lists can be lost of left at home. Smartphones could solve this problem and make these cards more appealing.
Geo-location services can connect customers with businesses, and many services exist that allow people to receive special deals when they are in the vicinity of a particular business. In addition, people will check in to a favorite coffee shop, bar, or restaurant as a way to tell their friends where they are and potentially earn discounts.
This same technology can be used to instantly alert the holder of a RAN card that they are near or in someplace where they can use that card. By registering their card with a mobile application, the user can tap into a dynamic list of locations and also receive coupons and other offers at the time when they are in the vicinity of a business and holding a card with committed funds.
The phone itself could become the payment device as long as all the merchants participating in the RAN have the same point of sale acceptance capabilities. Barcodes, near field communication, or some other acceptance method could be used to access funds stored on the card.
The power of RAN cards to tap into specific psychographics – people who have the same hobbies, travel to the same locations, or are part of the same rewards program, for example – has yet to be fully tapped. It may be that smartphones are the tool that will finally unlock the potential of this payment technology.