Bank Freedom, a wholly owned subsidiary of PrepaYd Inc., is attributing a dramatic increase in deposits into its prepaid card accounts during the third quarter to a substantial boost in card orders during the three-month period.
Cardholder deposits during the quarter totaled $50.6 million, up 357% from $14.1 million in the same period last year. Bank Freedom did not release its card-order totals.
The prepaid card provider, which began operations in 2008, cited its continuing need to reinvest funds into growing its deposit figures.
“Since this is a recurring revenue-based business, … we are willing to invest the time and money necessary to turn a card order in a profitable recurring revenue stream,” Bruce Berman, Bank Freedom CEO, said in a press release.
Bank Freedom executives were not immediately available for additional comment.
The institution experienced a strong September, when cardholders loaded some $29.4 million into their card accounts. The loaded $8.6 million in July and deposited $12.5 million August.
Bank Freedom’s large increases are likely the result of starting with a small customer base and showing growth comparisons from there, notes Ben Jackson, a senior analyst in the prepaid advisory service at Mercator Advisory Group.
But its timing also is good, he says. “They are working on increasing prepaid at a time when prepaid is becoming an option that is starting to stack up favorably against regular bank accounts,” Jackson says.
In its press release, Bank Freedom cited moves it made this year to improve its visibility in the crowded prepaid market.
In July, the company announced it secured an additional $2 million in equity and used funds from the financing to make infrastructure upgrades and increase marketing efforts. Part of those efforts included offering its customers prepaid wireless phones and service to help create more customer retention around its card products (
At the time, Berman viewed the move to prepaid wireless phones as an entry into mobile payments.
“If you’re a prepaid card company and a prepaid wireless provider, you’re getting ahead of the game,” Berman told PaymentsSource. “This is a [mobile] payments move.”
Whether Bank Freedom’s wireless offering helps it become a differentiator remains to be seen, Jackson notes.
“The [wireless phone] approach is good for stickiness and reducing churn, which is a big problem in the industry,” he says. “But I’m not sure that’s going to be enough on its own to push them into [a better spot in the market].”
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