Recent announcements by MoneyGram International and nFinanSe Inc. about growth in the number of places where they offer reloading services to prepaid cardholders illustrate the importance of reloading to the prepaid industry.
The industry considers reload networks "its Holy Grail" because they help prevent cardholders from using up card funds, then throwing the card away, said Brent Watters, a principal analyst at Mercator Advisory Group.
In December, MoneyGram, a Minneapolis company, expanded its ExpressPayment agent sites to 40,000 by adding CVS drug and 7-Eleven convenience stores nationwide. ExpressPayment handles mostly bill payments, but reloading prepaid cards is becoming a more important part of the business, said Greg Waltz, MoneyGram's vice president and general manager of payment products.
"As the prepaid card category itself grows, it very likely will become an increasing percentage of our ExpressPay business," Mr. Waltz said. He declined to give specific data on transactions or card loads.
Retailers like to have an in-store reload site because cardholders load their cards by bringing in cash and often spend money in the store at the same time, Mr. Waltz said.
"For retailers, it is all about the foot traffic. They love to see the [cardholders] walk into their stores with cash in hand," he said.
Prepaid card providers want to make sure they give cardholders a convenient way to add funds to their cards, Mr. Waltz said. "Prepaid card providers don't find it profitable to have a card that is loaded once, spent down, and is gone," he said.
nFinanSe, a Tampa provider of prepaid cards, recently began selling them through Dollar General and Winn-Dixie stores. Cardholders can reload cards in the stores where they bought them or at MoneyGram sites, nFinanSe said. This means customers have more than 70,000 sites, including stores and check cashers, for loading funds, it said.
But Mr. Watters said just having many loading sites does not spell success for a company.
Cardholders should know where in the store they can add funds, and the process should be consistent so cardholders are comfortable giving their money to a clerk, he said.
"Any little change can make one reluctant to reload," he said, especially consumers who lack bank accounts and often want to do transactions in cash.
In a recent report, Mr. Watters wrote that the average reloading fee for general-purpose prepaid cards is about $5. This means cardholders should load a high dollar amount in order to minimize reloading fees. The report says the average reload for prepaid cards is about $150.
Mr. Waltz said MoneyGram charges $3.95 to add funds to a card and offers instant loading. A cardholder hands money to a clerk and has access to the funds on the card once the clerk enters the amount on the terminal, he said.
Cardholders who have an nFinanSe Discover prepaid card can load funds onto their card accounts at nFinanSe sites for $2.95 and at MoneyGram sites for $3.95.
In his report, Mr. Watters wrote that scaling fees to the amount loaded may offer a way for cardholders to minimize reloading fees. But reload companies should have a standard fee schedule so cardholders know what to expect, he said.
Mr. Watters said reload networks are the main difference between single-use cards and reloadable ones that can generate recurring revenue. The latter are a useful payment method for customers, especially those who prefer cash.