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By Ben Jackson
Recent announcements by MoneyGram International and nFinanSe Inc. about growth in the number of places they offer reloading services to prepaid cardholders illustrate the importance of reloading to the prepaid industry.
The prepaid industry considers reload networks as " its holy grail" because they help prevent cardholders from using up card funds and then throwing the card away, Brent Watters, principal analyst at Mercator Advisory Group, tells ATM&Debit News.
In December, Minneapolis-based MoneyGram expanded its ExpressPayment agent locations to 40,000 by adding CVS drug and 7-Eleven convenience stores nationwide. ExpressPayment handles mostly bill payments, but reloading prepaid cards is becoming a more-important part of the business, says Greg Waltz, MoneyGram vice president and general manager of payment products.
"As the prepaid card category itself grows, it very likely will become an increasing percentage of our ExpressPay business," Waltz says, declining to provide specific data on transactions or card loads.
Retailers like to have a reload location in the store because cardholders load their cards by bringing in cash, and they often spend money in the store at the same time they load a card, Waltz says.
"For retailers, it is all about the foot traffic. They love to see the [cardholders who want to reload a card] walk into their stores with cash in hand," Waltz says.
Prepaid card providers want to make sure they give cardholders a convenient way to add funds to their cards, he adds. "Prepaid card providers don't find it profitable to have a card that is loaded once, spent down and is gone," Waltz says.
Prepaid card provider nFinanSe Inc. recently began selling its cards through Dollar General and Winn-Dixie stores. Cardholders can reload their cards at the stores where they bought them or at MoneyGram locations, the company says. This means customers can go to more than 70,000 locations, including stores and check cashers, to load funds onto their cards, the company says.
But just having many locations where consumers can add funds to cards does not mean a company will be successful, Watters says. Cardholders should know where they can add funds to a card, and the process should be consistent so cardholders are comfortable with giving their money to a clerk, he says.
"Any little change can make one reluctant to reload," especially among consumers who do not have bank accounts and often want to make transactions in cash, Watters says.
In a report, Watters also notes the average reloading fee for general-purpose prepaid cards is about $5. This means cardholders should load a high dollar amount into their card accounts to avoid multiple fees each time they load value. The report says the average reload for prepaid cards is about $150.
MoneyGram charges $3.95 to add funds to a card and offers instant loading, Waltz says. A cardholder hands money to a clerk, and the cardholder can access the funds on the card once the clerk enters the amount on the terminal, he says.
Cardholders who have an nFinanSe Discover prepaid card can load funds onto their card accounts at nFinanSe locations for $2.95 and at MoneyGram locations for $3.95, the company says.
Scaling fees based on the amount loaded may offer a way for cardholders to add funds to their card accounts at a lower cost, Watters suggests in his report. But reload companies should have a standard set of fees so cardholders know what to expect, he says.
Reload networks represent the main difference between single-use cards and reloadable ones that can provide ongoing revenues for companies and a useful payment method for customers, especially those who prefer cash, Watters says.
