Private Equity Firm Sees Opportunity In Payments Market With Acquisition Of Prepaid Solutions USA

In a move designed to gain entry into a rapidly growing prepaid-payments market, an Atlanta-based middle market private equity firm recently acquired Prepaid Solutions USA from West Suburban Bank Bancorp Inc. of Illinois and renamed it Prepaid Solutions Inc.
The companies did not disclose terms of the deal.
Prepaid Solutions is Navigation Capital Partners’ first foray into the payments industry. The firm also has stakes in companies ranging from a highway-construction supplier to a car-financing company.
“The play here, as far as we’re concerned, is the fact that the payments game is a pretty lucrative, go-forward industry that we want to be a part of,” says O.G. Green, Navigation Capital operating partner.
Prepaid Solutions will keep any relationships it had under West Suburban Bank, according to company CEO Ken Goins, who was appointed to the position by Navigation Capital. Those relationships will be a key component in how the company proceeds going forward, Goins tells ATM&Debit News.
“We want to take the business we have today and make it run as effectively as possible and to grow what we already have,” he says. “By no stretch of the imagination have we fulfilled the market opportunities in front of us today.”
West Suburban will continue to issue the card. Metavante Technologies Inc. primarily processes the transactions, but Prepaid Solutions USA also used Fidelity National Information Services and Galileo Processing Inc. West Suburban is primarily a Visa Inc. issuer, but also works with MasterCard Worldwide.
Goins estimates more that $350 million in funds have been loaded on the cards since West Suburban started the division in 2001. Those cards include general-purpose reloadable cards, payroll cards and gift cards.
Dan Grotto, who previously served as the head of Prepaid Solutions USA, was named president of the new entity and primarily is responsible for the company’s portfolio. Grotto has provided the division with “good strategy” throughout his tenure, Goins says.
Prepaid Solutions USA had just started providing payroll debit cards to the cruise line market. Goins declined to reveal specific companies, but such partnerships could enable Prepaid Solutions Inc. to “leverage an existing opportunity and possibly get into other areas that have to do with foreign-currency [travel cards],” Goins says.
Green is determined to target the financially underserved market, particularly the U.S. Hispanic population. “We’ll focus on that and see how we can carve a niche in that area because we feel it is undeveloped,” he says. Prepaid Solutions Inc. needs to build trust within that market, Goins says. “We have to find ways to build loyalty to the cardholder and why they should trust our company,” he adds.
A recent agreement between MasterCard Worldwide and Univision Communications Inc. to market a cobranded gift card and a general-purpose prepaid card show the potential opportunities within the U.S. Hispanic population, Green says.
“There are other Hispanic properties similar to Univision that we can partner with [to build trust within the community],” he adds.
Such partnerships could bring Prepaid Solutions more into the spotlight, something it has purposely avoided.
Prepaid Solutions USA had a tendency to stay in the shadows from the time it was founded in 2001, according to Brent Watters, analyst and director of marketing at Mercator Advisory Group. “They didn’t want to attract the competition with what they were doing,” he says. “There is a lot of innovation going on there, but it’s hidden.”
That changed a bit in February when the company partnered with video-game developer and publisher Capcom Entertainment Inc. to introduce a reloadable prepaid rewards card designed specifically for gamers. Prepaid Solutions USA viewed the partnership at the time as an opportunity for West Suburban Bank to create deposit accounts in different regions where the bank did not have a physical presence.
“It’s a great concept,” says Goins, who reveals a similar partnership is in the works with fast-food chain Taco Bell.
 “They tapped into a major market with the Capcom card,” Watters says. “That card is all about building a solid relationship with the cardholder through the rewards.”
Navigation’s acquisition of Prepaid Solutions USA may be the first step into building something larger, Goins says. “We will look to expand the business and look at other acquisitions of companies that might be able to complement what we do,” he says.
Now probably is as good of a time as ever for Navigation to make this kind of purchase, Watters says. A period of time existed a couple of years ago when companies were weighing the benefits of purchasing a prepaid card provider, he says, noting the chatter died down because companies were not finding strong enough players in the market.
“If you’ve done your homework, then a player such as Prepaid Solutions is a target worth reviewing and seeing what they have to offer,” Watters says.