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The Los Angeles Metropolitan Transit Authority has a lot riding on its forthcoming pilot of a cobranded prepaid bank card that also enables cardholders to pay bus and train fares, and so do its partners in the trial – prepaid program operator Ready Credit Corp. and Visa Inc. If the card is rolled out, LA Metro could net more than $7.8 million over three years under a 50-50 revenue-sharing deal proposed by Ready Credit, a Minneapolis, Minn.,-based prepaid startup company, according to preliminary projections released by LA Metro and obtained by CardLine's sister publication Cards&Payments. Visa sees a successful pairing of prepaid bankcards and transit fare-collection in Los Angeles as a model for other cities. Under a proposal prepared in part by Visa, Ready Credit would share revenue with the transit operator in return for marketing a Visa-branded prepaid "ReadyCARD" to LA Metro transit riders. Ready Credit also would set up instant-issuing and reloading kiosks at transit stations. The pilot, which the parties say is the first of its kind, is set to begin in mid-2009. The cards would put a contactless chip on conventional Visa-branded magnetic-stripe prepaid cards. The chip would carry a Visa payWave application and a separate contactless transit application, known as TAP. Users could buy the card at kiosks and load up to $500 or apply for a personalized version tied to an account, into which they could load up to nearly $10,000, including depositing their paychecks. They could use the cards for retail purchases with either the magnetic stripe or by tapping at merchant outlets that accept payWave, as well as tapping it to board buses and trains that already take TAP cards. Following the 12-month trial, if the project is approved, Ready Credit predicts it could issue more than 300,000 cards over three years and generate more than $15.5 million in fees from users for issuance, maintenance, reloads and retail purchases, of which LA Metro would receive half under preliminary estimates. "If the consumer chooses to use the card only for transit, then there are no fees; that's a really important distinction in the LA pilot," Tim Walsh, president and CEO of Ready Credit tells Cards&Payments. Walsh notes mass-transit operators in the United States usually have a high percentage of unbanked or underbanked customers, which are the prime market for prepaid cards. According to the project proposal, Visa is funding much of the estimated $1.6-million cost of the pilot to confirm its "hypothesis" that prepaid cards supporting transit payment will have higher than average acquisition rates and spend. "If this proves to be true, Visa does have a positive five-year national business case," according to the proposal.
