Corporate cards have come a long way since the basic travel and expenses (T&E) model. Spending control remains the driving force behind many corporations’ adoption of corporate cards, but prepaid cards can now provide companies with data, sales incentives and even branding opportunities. Government entities are also getting in on the act as they seek more efficient ways to issue social benefits and subsidies.
Starting life in the US about 20 years ago and finding its legs in Asia-Pacific in the last five, Citi’s prepaid model plays second fiddle to the much larger and more mature commercial card business, though it is growing fast. The bank’s global transaction services (GTS) wholesale cards business, which includes both commercial and prepaid cards, has grown year-to-date by 97% in Asia-Pacific, driven by the bank’s 400 clients in the region. By contrast, the prepaid business has just 20 clients regionwide, but there is a full pipeline and plenty of activity lined up for 2011, said Jason Tiede, Citi’s regional head of wholesale cards. The bank only launched its regional prepaid card business in Australia at the beginning of the year, subsequently launching in the Philippines in October, and is scheduled to add multiple clients in a further four countries in the region in 2011, pending regulatory approval.
The beauty of the prepaid model is its flexibility. Whereas commercial cards are a credit product funded by corporations and cardholders are all employees making purchases on behalf of the company, prepaid cards deliver payments direct to individuals. “For instance, every Toyota salesperson in the US has a prepaid card in their wallet. Every time they register a sale, it goes into the system. Toyota sends us a file with the sales data; we then deliver the payment onto the card and inform the recipient by either email or text,” says Tiede. This notification contains not only payment information but also data related to that payment such as details of the vehicle sold and location of the dealer.
This payment tool is not best used to deliver core compensation, but is ideally suited for lower value higher volume payments such as sales commissions. Prepaid cards can also enable companies to provide cash rewards direct to consumers and at the same time give visibility to the brand. Rather than reimbursing cash via a credit card or a bank account which may not even be noticed by the customer, the customer is given a disposable single-payment Visa or MasterCard. For instance, as an incentive to buy Toshiba products, instead of a gift voucher accepted at a handful of different retailers and only for a limited product range, a firm can offer a company branded prepaid MasterCard to be used anywhere.
This is both highly visible and adds trophy value, said Tiede. “These cards are always funded by a government or corporation, but they appeal to the widest audience and can be used in any of the 32 million worldwide locations Visa or MasterCard are accepted,” he said.
Tiede likens these cards to branded currency. “Ten years ago, we thought that companies would limit prepaid cards to their own products, but it turns out that a customer who has just bought a product from Company A may not want another [similar product] straight away. So in a pretty crowded marketplace where there are always different offers and cash is king, prepaid cards can get you the appeal of cash but with trophy value and branding.”
Governments in the region are also looking at using prepaid cards. In the US, prepaid cards are used to distribute welfare payments and social benefits. The system is automated, audited, digital, and an effective way to manage fraud and corruption. “It’s also a great way to make sure that when you issue government benefit it is going to the right person. We are looking to launch this type of government prepaid card programmes for clients this year in Asia-Pacific,” said Tiede. Tellingly, executives who want to buy prepaid cards are often heads of marketing or sales who are attracted to the visibility, branding and data that can be sent with the payment.