"Popcorn card" is a term that has been coined to describe a universally accepted prepaid debit card, characterized as being readily accepted and easy to consume. The analogy to popcorn comes from its appeal and ease of consumption, adaptation for multiple uses, such as decoration and making candy, and finally its low price.

My first exposure to a prepaid debit card occurred more than 15 years ago during a business trip to Washington. Two co-workers and I utilized the subway system for transportation from Arlington, Va., to downtown Washington and encountered an automated prepaid debit system upon entering the terminal.

More recently, the domestic telephone industry has introduced prepaid debit cards for use in paying for local and long distance telephone calls. Taking a lead from foreign telephone companies that do not utilize calling credit cards, domestic telephone companies have modified their prepaid programs to utilize existing technology in their systems.

Unlike the stored value cards utilized in Europe, domestic telephone cards do not utilize either chip or magnetic recording technologies. The intelligence for the prepaid card resides in the processor rather than in the card or the telephone.

It is estimated that prepaid cards will capture as much as 30% of the current credit card calling market by 1997.

The preceding examples illustrate limited applications of a very flexible payment vehicle that has potential for use in automating the retail payment of small ticket items. Imagine the synergies that would be created if disposable magnetic striped cards were sold to consumers by financial institutions and also available through travel related outlets in denominations of $5, $10, and $20.

Prepaid cards in such an environment would continue to be used to place telephone calls, but more importantly, used to pay for small purchases through point of sale terminals.

High-volume, low-ticket merchants would be the logical retail outlets to initially honor prepaid debit cards as a vehicle to increase sales. Once POS terminals are installed, credit card transactions could be processed through the same terminals for an occasional high-ticket sale.

The first to benefit from the use of popcorn cards would be the high-volume, low-price retailer.

Young adults and teenagers represent the consuming segment that would be natural adopters of popcorn cards for personal money management and transfer of funds from parents.

College students, military personnel, and truckers would find benefits in using the cards, which would eliminate the need for pocket change and provide the convenience of a credit card with no bills to pay later, with the maximum loss exposure being the face value of the card.

Tourists would enjoy the added debit card convenience of greater acceptance than credit cards and travelers checks as well as personal management of leisure spending.

Commercial benefits of popcorn cards include the reduction of cash in circulation and the associated costs of ordering and handling cash by both financial institutions and retailers.

Financial institutions would also realize revenues created through merchant discounts for processing POS transactions, in addition to revenues inherent with entry into the new market of telephone payment services.

How would the service be introduced? The first step will be adoption of the program by either a regional electronic funds transfer system or a national bank credit card network. Second, high-volume retailers will have to be recruited to accept the payment product.

Finally, financial institutions will have to sell popcorn cards to the public and provide retailer settlement services to complete the payment and collection cycle.

The telephone industry has entered the credit card market and is in the process of introducing prepaid debit cards as a new source of revenue. It can be reasonably assumed that at some point the telephone industry will use the product to enter the retail payment market in competition with the financial industry.

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