Where WesCorp's Anthony Kitt sees a real opportunity for credit unions is in stored value cards.
"This is a brand-new environment," said Kitt. "There are basically two types. Open cards, such as MasterCard or VISA, or a closed card, which is geared toward the institution that issued the card, such as Sears." In fact, noted Kitt, there are $5 billion loaded on Starbucks cards today that is currently in a state of float.
Included in this category is payroll cards. Kitt noted that $33 billion is spent each year just on processing payroll checks, with the average cost of processing a payroll check at $1.90 each. Some $48 million worth of payroll checks each year are lost, and must be replaced, and 25-million wage-earners in the U.S. are currently "unbanked." The latter group are ripe for such loaded payroll cards, according to Kitt.
Those factors are driving the attractiveness of payroll cards, in which the employer gives a cash-loaded card in lieu of a payroll check.
The benefits to a credit union are twofold: internal use with their own employees, and as a distributor on behalf of employers. With the former, Kitt noted there are operational cost savings, increased direct deposit participation, reduced check fraud, and potential revenue stream with branded cards. With the latter, the cards are convenient, require no bank account, offer 24x7 access to funds, can be used at point of sale, and help the holder to avoid check-cashing fees.
A separate category is prepaid cards, such as the aforementioned Starbucks card. The cards can be reloaded online, and are honored at more than six-million locations. "One of the biggest things I've heard from consumers on this is that they can now look at the spending habits of their children to whom they give prepaid cards," said Kitt. "This is now a huge wave of providing dollars in a debit form on a branded card."
The cards can also not be overdrawn (unlike some debit cards) and the CU has the opportunity to earn daily interchange for purchase.
