TSYS Prepares for New Prepaid Rules, Tests of Tech Products

Total System Services is close to beginning tests of new products and merchant services, and is already seeing a benefit from last week's launch of Apple Pay. But in prepaid, a significant business for the processor, TSYS is still awaiting new rules from the government.

During the Columbus, Ga.-based company's third-quarter earnings call, CEO M. Troy Woods addressed long-pending rules and guidance from the Consumer Financial Protection Bureau on prepaid products. He expects these rules to emerge over the next few months, covering Regulation E protections on unauthorized transactions, deposit insurance, disclosures and overdraft polities.

TSYS has made a number of moves in the past few months to expand its NetSpend prepaid card unit. Walmart will place NetSpend's reloading prepaid product in all 4,300 of its U.S. stores over the next month, and Netspend also recently launched a cobranded prepaid card with Western Union. "That will provide a way to move money in minutes and pay anywhere MasterCard is accepted, and manage money and pay bills without a checking account," Woods said.

Walmart also recently began offering rival prepaid company Green Dot's GoBank account. Walmart owns a 4% stake in Green Dot.

As Woods has traveled the country since becoming CEO of TSYS earlier this spring, he said one of the questions he's most often asked by investors is the impact that the CFPB's pending rules will have on prepaid.

"Today NetSpend follows the rules and regulations in respect to Reg E and all of our products are FDIC insured," Woods said, adding TSYS helped create a standard for disclosure and its overdraft policy is designed to help consumers to avoid fees.

"We will work with and meet with the CFPB in all of these areas," Woods said.

TSYS also benefited from its early support of Apple Pay, Woods said. TSYS will set testing centers across the U.S. for Apple Pay-related applications. Apple Pay has generated hundreds of leads so far, said Paul Todd, TSYS' CFO.

Total revenue for the quarter was $616.9 million, an increase of about 8.2% over the $570 million for the same period in 2013. Total accounts on file passed 600 million for the first time, the company said in an Oct. 28 press release that accompanied its earnings report. The performance was helped by strong growth in the company's NetSpend prepaid card subsidiary and the processor's North American business, Woods said.

TSYS is also finishing a large technology project called Surround, which is a suite of technology and products that's designed to deliver services added to payments — an important strategy as payment processors move beyond payments.

Surround improves how clients can manage payments services, Woods said. "When [we] combine this framework with our industry platform we can introduce new products and services with greater flexibility," he said.

TSYS expects early tests of the system will be complete next month, and it will then move into beta testing with a Canadian client with a target launch in 2015.

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