Ukash, a U.K. company that offers prepaid vouchers for online shopping, says its new Apple Inc. iPhone application can help it finally break into the U.S. market.
Ukash is already used in 50 other countries.
"If you look at our global map, the U.S. is really the missing piece of the jigsaw puzzle," said David Hunter, Ukash's chief executive.
Ukash vouchers have unique 19-digit codes consumers enter when making purchases on merchant websites. Ukash sells the vouchers to consumers who prefer not to use payment cards for online purchases or who cannot use cards.
More than 420,000 merchants worldwide accept the vouchers as payment.
As smartphone use among consumers continues to rise, Ukash said it saw an opportunity to expand the functionality of its service beyond the voucher and into a mobile wallet.
Consumers who purchase the vouchers in different denominations at retail locations enter the 19-digit code into the mobile app, Hunter said. The app automatically produces another unique code if the funds are not depleted from the initial transaction.
Ukash also is adding a person-to-person funds transfer feature that enables users to send and receive funds through the voucher account. That feature is one of several issues that have prevented Ukash from entering the U.S. because of differences in state funds transfer laws.
"We're trying to look for local partners [in the U.S.] that can help us with distribution and, more importantly, different state money transfer laws," Hunter said.
Ukash also will have to deal with U.S. money laundering regulations because consumers do not need to provide personal information to purchase a voucher, said Ben Jackson, senior analyst in the prepaid advisory service at Mercator Advisory Group in Maynard, Mass.
Hunter said Ukash can compete with prepaid card providers in the U.S. He likens his company's system to Green Dot Corp.'s MoneyPak products, which consumers purchase in retail stores to top up their prepaid card accounts.
Though Ukash must find a viable distribution partner while also dealing with regulations in the U.S., Jackson said Ukash can become a legitimate player if the Durbin amendment forces banks to rethink their debit and checking account strategies.
"If Durbin leads to an increase in the cost of owning a checking account and more people abandon checking accounts, then you are going to see more people needing to find ways to turn cash into electronic funds," Jackson said.
The Federal Reserve Board has proposed capping the debit card interchange rate at 12 cents per transaction from an average of 44 cents.
Some banks already have raised checking account monthly maintenance fees to offset potential lost revenue from the proposed changes.
Ukash's initial marketing plan in the U.S. might be toward financially underserved households, but Jackson said the voucher system works for any budget-conscious consumer.
"Consumers will look for options like this because they might be able to spend without incurring debt," he said.
Ukash charges no purchase fees for vouchers or funds transfers. But it does charge merchants a small transaction fee for voucher purchases. Ukash has never revealed those rates.
The company plans to add more functionality to the app, which is in development for other smartphone platforms, including Google Inc.'s Android.
