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First Day Notes from the Power of Prepaid

Adam Rust's picture

Posted June 28, 2013

Interesting facts from the first day of The Power of Prepaid at the Gaylord National Hotel and Convention Center at National Harbor, Maryland:

a) Buried deep in Dodd-Frank, in the section entitled "miscellaneous," is a portion that addresses the issue of "blood phones."

Many people contend that the social cost of tantalum, a highly corrosion-resistant metal that is used to make cell phones, is too high. In some cases, militias fund their costs by mining for the metal. Dodd-Frank covers that.

b) People are now renting tires. This is big if you are a payday lender, as it might mean the end of your business. Payday lenders often make the argument that their product is necessary because of the unforeseen car repair, of which flat tires are among the most prominent of their examples. Rent-to-own tire shops sell a $400 set of tires to people for a two-year stream of monthly payments of perhaps thirty dollars.

c) Approximately twenty percent of the customers that walk in to a PNC branch to get a checking account are turned down.

d) According to Matt Kelley of Sterne Agee, some banks (Bank of America, JP Morgan Chase are examples) have created departments in charge of selling off branches.  One community bank in Connecticut tells him that it intends to reduce its square footage of retail branch space by more than 20 percent in the next few years. In some cases, the banks will come back to a community, albeit with a much smaller physical presence.

e) Kelley also mentioned that remote deposit appears to quicken the pace of the death of the physical branch. While branch visits are declining in general, the falloff is much steeper with banks that are offering remote deposit.

f) Will the market really reach a leveling point in prepaid when barriers to entry are becoming so high? Banks like MetaBank and Bancorp have spent lavishly to develop the back end infrastructure for their prepaid card systems. As sponsoring banks, they are able to exert a lot of control over how their program manager partners operate. Moreover, its becoming less and less likely that other small banks will build up into prepaid. The big banks are there and more are sure to arrive, but those firms generally seem interested in making in-house cards. Moreover, the big banks have different rules. Under Durbin, their cards are limited in ways that small bank cards are not.

g) Ingo's check-cashing service is catching on. Ingo (formerly Chexar) has a white-label remote deposit service that couples check cashing with immediate clearance of funds. Cards like Rush (not Rush Card Live) and iBankUp charge about 1 percent to advance a person the sum of the check upon presentation. Usually that means that they get access to their funds between three and five days ahead of time.