Prepaid Cards and Bill Payment – Is Offering Bill Pay Necessary?

by Ben Jackson 0

In the furor surrounding the final rules ofthe Durbin Amendment, businesses across the financial servicessector are asking themselves what they need to offer in order to becompetitive. Companies designing prepaid products that can serve inthe place of checking accounts frequently consider bill payments asa necessary feature.

Because open-loop prepaid cards can perform the same transactionsas other network-branded cards, it may not be necessary to doanything other than educate consumers on how they can use thosecards to pay bills online and over the phone. A Web page thatprompts card holders for a zip could easily display the links toonline bill payment portals for major utility companies in thecardholder’s area, for example.

These kinds of transactions do not address, however, payments forthings like rent and payments to small businesses such as day carecenters. In this case, it may be necessary to include an onlinebill payment function, a person-to-person transfer capability, oreven a way for a customer to buy a money order that is mailed forthem online using their card.

In evaluating options, program managers need to consider theircardholder base and what the needs of that base include. At thesame time, managers also need to consider the size of their issuingbanks. If those banks are over $10 billion in assets, then allowingcardholders to access funds through any means other than the cardmay lead to a loss of interchange income.

New regulations have complicated the features and functions thatcan be offered with a prepaid card. Despite that, cardholder needsremain the same, and program managers should fully explore all theoptions for meeting those needs, as some may be simpler than theyseem.