Until fairly recently, the travelers-check market was paper-based-a surprising trend, given the prevalence of debit cards in personal checking. Industry heavyweight American Express was the first to offer its travelers checks in plastic form, rolling out the Travelers Cheque Card in 2004; Visa followed shortly thereafter with its Visa TravelMoney. And now MasterCard is getting in on the action with its own prepaid travel card, partnering with London-based foreign-exchange specialist Travelex. The turnkey program, which is slated for customer enrollment by February, allows participating banks to offer reloadable MasterCard-branded cards as alternatives to travelers checks and cash.
According to corporate consulting firm Boston Consulting Group, the travel-card market is projected to grow to $7.5 billion in gross dollar volume by 2010. "The travelers-check market is the next huge wave of paper to plastic," says Mike Brunner, Travelex prepaid cards vp. "And the plastic travel-card solution just really began getting some traction about a year ago. ...MasterCard wanted to put a competitive offering out there to compete with Visa and American Express. They have member banks with primary MasterCard strategies that would rather issue a MasterCard product just as Visa does for their members."
The cards can be loaded with between $250 and $10,000 in U.S. dollars and can be used at the point of sale and to withdraw local currency from MasterCard ATMs; the remaining balance can be saved for future travel or refunded to the cardholder. "When consumers go away on travel, what they really care about the most is the percentage of places where they can actually make use of their travel funds," says Scott Galit, MasterCard International global prepaid product development svp. He says the firm has more than 1.1 million ATMs globally - more than any other competitor-and 23 million point-of-sale locations. "We think our product is a tremendous value proposition for consumers, and we think that issuers will recognize that," he says.
"Issuers" is a bit of a misnomer, however, as participating financial institutions act as agents, not direct issuers-Storm Lake, IA-based MetaBank is issuing the cards through its Meta Payment Systems division. "The term 'turnkey' is used a lot, and in many cases, not appropriately," Galit says. "But in this case, it is truly a turnkey program. Even without doing much of anything, [banks] get a state-of-the art system to use." Sunrise, FL-based WildCard Systems is providing Travelex's technology platform. "[Banks] get a state-of-the art product, and they can put their brand on the card, which is also a very important value proposition for the agent that's selling the card," he says. Such benefits allow banks to strengthen their brand relationships while offering a superior product-one that comes with Travelex's travel expertise, he says. "A need for emergency replacement, a need for emergency cash access, a need for emergency travelers services-those are all in place and able to be provided as part of the program," he notes.
Companies tout added-value perks when pushing their products; Visa, for example, began offering its travel cardholders reimbursement for lost luggage in July. This is because, on their own, travel cards run the risk of being a tricky sell, says Celent senior banking analyst Ariana-Michele Moore. "You go overseas, and most people will pay with a credit card-the exchange rate is often very good, and it's very convenient since most people accept one [of MasterCard, Visa or American Express cards] overseas," she says. "So there's less of an incentive to actually go through the hassle of going down to your local bank, picking up a travel card, loading the funds onto it, and then using that overseas, and then either recouping the funds when you come back to the United States, or simply using them all here in the states. So what it becomes is one extra card to carry."
Not so, says Brunner. "Your bank debit card, typically, can serve the same function," he says. "But if I lose my bank debit card, my name's on it. And while you're indemnified obviously against losses if it's stolen, if that was your primary access for the cash or the currency you wanted to use for that trip, you're going to be greatly inconvenienced."
Furthermore, says Amex spokesman Robert Sherman, the average amount on a Travelers Cheque Card is 12 percent higher than that of a paper check-and the cards are being reloaded. "There's an indication that the card is attracting high-spending customers," he says.
Galit says much of the MasterCard program's implementation is left to the individual member banks-whose names are not being released-with some choosing to offer the card to non-customers. Despite this flexibility, he says, regulatory concerns are no different than they would be with paper checks, and points to the electronic and, therefore, easily trackable nature of the card as an added safety net.
MasterCard, Visa and Amex aren't releasing travel card enrollment figures or sales volumes, though Sherman says the market accounts for part of Amex's annual $20 billion in prepaid products. Galit says the market's potential is very real. "People seem to have a lot of questions about the size of the opportunity and things like that, and the fact is that travelers checks are sold today-consumers already put their money into travel-currency products, and a lot of what we're talking about is just replacing that with a card," he says. "Essentially, you're migrating existing volume over to a new product. It's an enhancement to the travel-currency line, as opposed to necessarily trying to create something that's completely and drastically new from the ground up."
