IMGCAP(1)]
Payroll card companies want to make their cards more appealing to consumers and employers by including extra offers.
For example, payroll card provider PayCardUSA LLC has hired BSP Rewards Inc. to build an online shopping mall for its cardholders, BSP's parent company, MediaNet Technologies Inc., announced last month.
PayCardUSA cardholders can shop online at more than 750 merchants and earn cash rewards, Stefanie Kitzes, BSP director of business development, tells Prepaid Trends.
"We've created an online mall, and each of the merchants pays a rebate in the form of cash," Kitzes says.
Merchant-funded rewards can be very useful to prepaid card program managers because they can provide rewards to cardholders, employers, processors or anyone else who needs an incentive to use or support the cards, says David Fish, senior analyst, credit and prepaid advisory services, at Mercator Advisory Group Inc., which is based in Maynard, Mass.
An online mall is also an example of how companies can offer extras to convince employees to get their wages on cards instead of checks, says Brent Watters, Mercator senior analyst. It also creates an opportunity for a payroll card provider to earn funds in addition to the program fees, Watters says.
"Say you get a buy-in from a merchant of 15% to 20%, you can take 5% yourself and pass on 10% to employees," Watters says. "You're generating revenue from the payroll card."
This is how the BSP malls work. The merchants in the mall pay rebates on purchases made through the site to BSP, which keeps half of the rebate for itself and its partners, Kitzes says.
BSP pays the other half to the cardholder as an incentive to shop, Kistzes says.
Sometimes employers who offer the cards and the malls connected with the cards to employees share in the revenue from the discount, but some pass on the opportunity, Watters says.
"The employer doesn't want to be seen making money on the backs of the employees," Watters says.
Consumers using PayCardUSA cards can spend the rewards in the BSP mall to buy gift cards, or they can load the money back onto their prepaid cards, Kitzes says.
Merchants make money on the added volume directed to their sites by the online malls. Payroll card providers like the online malls because they provide a value-added service the provider can offer to employers who offer the card, Kitzes says.
Based in Marget, Fla., BSP has more than 60 malls and about 600,000 registered cardholders, Kitzes says.
The company expects the number of cardholders using its malls to grow to 3 million during the next four to six months, Kitzes says.
Fish says other comapnies offering merchant-funded rewards along with BSP, include St. Louis-based American Express Incentive Services LLC, Total System Services Inc. , which is based in Columbus, Ga., Atlanta-based Vesdia Corp., and New York-based Affinity Solutions Inc., which has signed an agreement with First Data Corp. of Greenwood, Colo. Some programs are online, while others offer rewards that consumers can use at stores and shopping malls, he says.
Most major retailers participate in several different programs, Fish says. Besides increased traffic, retailers also get marketing information about the cardholders that use the cards, he says.
"The merchants want access to customers," Fish says. "They are willing to provide tailored, relevant rewards because those have a higher uptake and a higher potential for redemption."
BSP is one of the most aggressive companies in the space, but Watters predicts companies offering add-ons to payroll cards will see their businesses grow in the next few years.
Add-ons give payroll cards "some added traction and appeal," Watters says. "You're definitely going to see more of this occur."
A private-branded mall costs about $7,000 to build, and BSP makes money by sharing the rebates, Kitzes says.
"We focus on getting people to shop and earning money from the transactions–that's where we see the value" as opposed to charging fees for building malls, Kitzes says.
Las Vegas-based PayCardUSA did not return calls for comment by deadline.
