Prepaid debit card marketer NetSpend Holdings Inc. is working with banks to broaden its distribution network beyond retailers and check cashers.
First State Community Bank, a subsidiary of the Farmington, Mo.-based bank holding company First State Bancshares, will sell NetSpend-branded prepaid cards through its 33 branches, Austin, Texas-based NetSpend announced Feb. 24.
The cards give First State “another way to say yes to low- and moderate-income consumers who want to establish a relationship with their bank,” Dan Henry, NetSpend chief executive, said during a company earnings conference call.
NetSpend’s fourth-quarter net income grew 79% from a year earlier, to $6.3 million, as customers loaded more money onto its prepaid debit cards and spent more frequently (
The company expects more retail banks to offer prepaid card products as alternatives to customers who no longer can qualify for or afford traditional deposit accounts, particularly as banks raise fees in response to regulations. Additionally, prepaid cards are exempted from the Durbin amendment to the Dodd-Frank Act, which instructed the Federal Reserve Board to set lower interchange rates for debit cards. The Fed has proposed a 12-cent cap on the interchange applied to most traditional debit cards.
NetSpend competitor Green Dot Corp. has said it similarly is in discussion with banks to offer prepaid card programs to customers (
Under First State’s agreement with NetSpend, which issues its cards through other sponsor banks, the bank will sell the same cards that NetSpend sells through its existing distributors.
The cards will cost $9.95 per month, or $5 per month for customers who use direct deposit, says Jennifer Lee, First State deposit operations manager. The bank will share revenue from the program with NetSpend, she says.
NetSpend and its partners will handle all account functions, including the issuing and mailing of cards, Lee says. Customers will be able to load funds into their card accounts at First State branches.
“Really what we were looking for was a product to offer those customers that we are currently having to turn away,” Lee says, adding the bank had been considering offering prepaid cards before regulations became an issue.
Working with banks “could add millions of people into the category of reloadable prepaid users,” says Gil Luria, a senior vice president with Wedbush Securities in Los Angeles who follows the prepaid card companies.
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