It seems like something an eighth-grader would dream up. An entrepreneur decides to tap the teeny-bopper market for financial services.He offers so-called "buying cards" to people as young as 13, calls the product Cobaltcard, with the tagline, "My money, my life, my card." Randall M. Chesler, the 41-year-old president and chief executive officer of Cobaltcard, says the product's main goal is to "empower" this age group by enabling them to make their own spending choices. Chesler says Cobaltcard was not meant to ride on the tails of American Express's "Blue card," but that cobalt "is a base element that reflects power and passion," noting that the idea of an "explosion" comes to mind. Offered on www.cobaltcard.com, children are told the product is "free to get, free to use and free of debt." Also, there are no interest charges or fees. Unlike other new shopping schemes for children, Cobaltcard can be used in physical locations where Visa is accepted, as well as in cyberspace. In effect, it is a debit card, with funds drawn from the youngster's account immediately when the card is used.Chesler says people 13-22 years old annually spend $150 billion, or between $3,000 and $4,500 each. Online purchases represent only 5% of the total. He declined to say how many cards he expects to issue, but added that "it's an untapped market, and it should be good business."Cobaltcard expects to make money from commissions and interchange fees. Some credit card experts, however, predict that the product cannot be profitable on its own. Clearly, others disagree. Cobaltcard has raised more than $20 million in equity, according to Chesler. Among the investors are the National Broadcasting Co., Crosspoint Venture Partners and Media Tech Ventures.
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The increasing adoption of virtual card payments by accounts payable departments has created an unexpected complication for suppliers: more friction in the processing, posting and reconciliation of payments and receivables. The root of the problem is that most suppliers rely on a manual approach to processing e-mailed virtual card payments. Suppliers are forced to balance their organization’s need for operational efficiency and control with rising customer demand to pay with a virtual card. But a new breed of technology enables suppliers to process virtual card payments straight-through, addressing the needs of buyers and suppliers. This paper details the growth of electronic business-to-business (B2B) payments, shows how manual approaches to processing virtual card payments cause friction in accounts receivables, describes a way to process virtual card payments straight-through, and highlights the benefits of frictionless payments.