In case you were wondering where they stood, important leaders from two of the largest companies in prepaid debit cards told an audience at last week's Power of Prepaid that their firms still want to find a way to restore credit to the prepaid card platform. They were similarly in synch in defending overdraft.
When asked why he thinks people like prepaid cards, Dan Henry of NetSpend ("A TSYS Company") redirected the conversation
to the question of credit.
"What they really want," he said, "or what we hear is that they want a pathway to credit. Not that they want credit, but they want a pathway. We need to find a solution to let our customer build some kind of credit history or a credit file, so that they can get meaningful credit at a reasonable rate."
The idea of a pathway to credit is an important conversation. Even now, after years of work, credit bureaus remain blind to the evidence presented by payments. People do need a way to get back to the mainstream. Henry may have only meant to talk about the need for some kind of positive payment technology. He may have been pushing in the direction of secured cards as a viable means of making a pathway. But in spite of those likely intentions, the conversation was re-set to credit.
At that point, Brad Hanson of MetaBank picked up his microphone.
"None of us wants to sit around with a limited-purpose GPR account," Hanson said. "We have to provide all of the services that consumers need and that includes credit. The form of the credit is the debate."
Soon thereafter the conversation turned to overdraft. But Hanson brought it back to credit:
Brad Hanson: "I think one of the unintended consequences of all of this regulation," he said, "is that innovation is stifled from providing an even better credit product. Everyone is scared to do it. We are afraid of getting crucified."
Dan Henry: "We have to admit that this industry is serving a consumer that the traditional [deposit services] industry has not been able to serve. But no good deed goes unpunished. Can we please come to the table and talk about to serve this consumer with a credit product, with an overdraft, and perhaps something on fraud [protection]?"
Then on to Overdraft
Let's just say that Dan Henry likes his overdraft product. A lot.
NetSpend has overdraft on its regular GPR as well as on the payroll cards it operates through its Skylight division. The price for the latter is ten dollars higher than the former. When challenged on the cost of the Skylight overdraft, he said "That is the second-best overdraft product in the country. The first is our GPR product."
For those that opt-in, NetSpend's overdraft costs fifteen dollars. But in many instances, the fee is reversed as NetSpend will drop the charge if the account deficit is settled within twenty-four hours. Unlike many of the overdraft products marketed with traditional checking accounts, customers can set the account up so that they get a text message if they are about to spend beyond their balance.
"We require instant messaging to enroll," he added. "Find me a bank in this country that wants to let you know what you are about to do....why kill the example of how overdraft should be?"
Henry's point is that it costs less, it is more flexible, and it has a second level of opt-in for ATM and POS spends.
But from a position on the floor, ex-Rush Card CEO Rob Rosenblatt countered with a question on the wisdom of consumer choice: "Most kids would rather have Kool Aid than milk," he said. "But their parents want them to have milk. Is there some way to mix advocate's concerns? Because the excess payment (s) that overdrafters can incur is pretty high."
Henry said that most of the overdrafts recorded on their accounts are made at gas stations and grocery stores.
Dan Henry: "I don't think there is anything we can come up with that advocates will be happy with. I think there is just a belief that there [overdraft] is an absolute 'no.'"