Faced By a Crush of Regulations, Higher One Leaves the Prepaid Business

by Ben Jackson 0

Higher One Holdings Inc., a payments company that specializes in providing services to colleges and Universities, is getting out of the prepaid campus card business. The company announced Dec. 15 that it has agreed to sell is disbursements business to Customer Bancorp Inc. for $37 million.

Higher One’s Disbursements business includes its proprietary Refund Management® Disbursement Service and the OneAccount. Refund Management® streamlines the financial aid refund disbursement process for more than 800 college and university campuses across the U.S. and the OneAccount is an FDIC-insured checking account offered through Higher One’s bank partners to more than two million college students. Customers Bank is a bank partner of Higher One and has been a provider of the OneAccount checking account since 2013.

(See the press release here)

The company said in the same release that it is considering selling its payments business as well. The sale has been driven in part by new regulations from the Department of Education, The Washington Post reports.

The $37 million sale comes months after the Department of Education barred colleges from forcing students to have their financial aid dispersed on prepaid or debit cards that charge fees for overdrawing the accounts. The government accused schools of acting as middlemen for their financial partners, pushing students into products in exchange for millions of dollars.

(See the article here🙂

The sale of the business to a bank may be a harbinger of things to come in the payments industry, if the regulatory vice continues to tighten. Banks are used to dealing with the myriad of regulations that come with offering financial services. It may be that many providers sell their businesses to banks instead of trying to navigate the regulatory environment. However, those buyers will undoubtedly avoid businesses that have been rendered unprofitable or inoperable by new regulations. As new regulations for prepaid cards loom in the New Year, the new survival trait could be solely having a large enough compliance department.

Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group