Hewlett-Packard Co. wants it known that its business interests extend beyond personal computers and printers. They also touch the payments industry in a significant way.
The Palo Alto, Calif., information technology company's new HP prepaid card services group is an extension of its HP cards and payments services portfolio. Both divisions focus on card processing and assist banks with launching card programs. HP prepaid card services was launched March 21.
HP is entering the prepaid sector at a time when consumers are rapidly adopting the payment form and financial institutions are seeking ways to capitalize on the market's growth, Robt Sadeckas, director of global card strategy at HP, said in an interview.
"We saw significant opportunities happening in the prepaid sector," Sadeckas said.
One opportunity includes the continuing issue of potentially lower debit card interchange rates, Sadeckas said.
Reloadable prepaid cards are a possible alternative to traditional debit cards for banks because they are exempt from the restrictions in the Durbin amendment to the Dodd-Frank Act.
The Federal Reserve Board has proposed cutting debit interchange rates to no more than 12 cents per transaction from an average of 44 cents.
"What was justifiable [to charge for interchange] is a lot harder to justify at the moment, and regulators are intervening there," Sadeckas said.
HP said stored-value and prepaid products provide an opportunity for it to "package together value" that would assist financial institutions in recouping revenue from lost debit interchange, Sadeckas said.
While U.S. banks wait for a final interchange ruling, HP is turning its attention to the international market.
Dee McGrath, HP's director of secured and unsecured lending, told Computerworld that an Australian financial institution has signed on to use HP's prepaid processing services.
Sadeckas confirmed an international partner, but declined to reveal the bank.
An international focus might be more beneficial to HP because the U.S. prepaid card processing market already has a number of large, established players, such as First Data Corp. and Total Systems Services Inc., said Madeline Aufseeser, a senior analyst with Aite Group LLC.
"When you look at the spectrum of who the providers are across the international space, there is not one size fits all," Aufseeser said. "Nobody truly dominates all of the markets and has a comprehensive offering."
In a sign that the company is ready to play in the international space, HP said the prepaid division supports the latest requirements of the EMV Integrated Circuit Card Specifications.
HP's prepaid processing services include inventory management, integration of prepaid into an existing HP-managed credit and debit card portfolio and a website that enables cardholders to track spending.
HP processes transactions for about 68 million credit and debit cards worldwide.
One of its most notable portfolios is the General Motors credit card, which HSBC Card Services Inc. issues.
HP also is keeping tabs on the emerging near-field communication payments sector. McGrath told Computerworld that HP is monitoring NFC-enabled mobile payments trials in Australia, Japan and other places.
Sadeckas said mobile payments is a way for HP to create some differentiation in the prepaid market.
"Having a stored-valued capability on the phone is attractive," he said.
