Launching: Openbucks Gift Card Payment Network

image Today at TechCrunch Disrupt, Openbucks  announced its “gift card” payment network which works like an ATM switch; you can use whatever value you have in a participating gift card to buy something at any participating online retailer.

For example, you could use the $20 in your Subway card (a beta participant) to buy virtual goods at online games. Eventually, they want to expand beyond the purchase of digital goods. 

The product is targeted to those that don’t have debit or credit cards, especially heavy game-playing teenagers. “Gift cards” would be added to the payment options at checkout at the gaming site. Traffic Spikes to 600,000 Unique Visitors

image If you want to attract customers between the ages of 12 to 21+, you could not have a better name than BillMyParents. But living up to that promise, not to mention appealing to parents, is a little trickier.

San Diego-based BillMyParents is a public company (OTCBB: BMPI) currently valued at $40 million. When we first looked at the company (March 2009), it was building an alternative payment mark similar to PayPal or BillMeLater. But the company appears to have pivoted into a more achievable prepaid card product.

Today, its core offering is a $3.95/mo prepaid MasterCard debit card (see full fee schedule below) that offers mobile alerts and basic parental controls (lock, unlock, reload). 

Fresh off a $7 million infusion of new funding (Nov. 2010, note 1), the company has ramped up its advertising with its first national TV commercial (on ESPN; link) and a mention in MTV’s Rob Dyrdek’s Fantasy Factory (which apparently has something to do with skateboarding). It is also working with Street League Skateboarding.

Evidently, those efforts are bearing fruit as website traffic is up 20-fold since December, to 600,000 unique visitors in May according to Compete estimates (see below). More importantly, traffic to the secure site (e.g., account holders) is up to 17,000 visitors in May compared to 7,000 in December (note 2).

Relevance for Netbankers: Teens want to spend. Parents want transparency and control. And banks want to attract teens and tweens that could be customers for the next 80 years. And if that’s not enough, in the United States, prepaid looks to be favored in the post-Durbin world (previous post).

So expect prepaid cards to be a hotbed of activity from both banks and non-banks (note 3). 

————————————— unique monthly visitors


Source: Compete, 28 June 2011

Parent section of BillMyParent’s website
(28 June 2011)

Parent section of BillMyParent's website (27 June 2011)

Fee schedule



1. Source:
2. Source:
3. For example, BankSimple

Is Prepaid the Durbin Antidote?

image Prepaid cards have been a bit of an afterthought for most banks and card issuers. Sure, they make the occasional appearance on banking sites in December as holiday gifts. But mainstream they are not.

But that was before traditional debit cards suddenly became unprofitable (note 1) thanks to the upcoming U.S. debit interchange price controls (see Durbin rant, note 2) combined with with last year’s reining in of overdraft fees.

It’s pretty easy to predict what happens next. Banks will do what any business would do when offering a popular, yet unprofitable product. Raise prices with new monthly/annual/transaction fees. And for customers that are fee adverse, banks will offer two alternatives:

  • Credit cards for the credit worthy
  • Prepaid cards for everyone else

Bottom line: Prepaid bankcards are about to become much more popular. Here’s why:

  • More interchange revenue to the issuer
  • Easier to sell online with fewer risk management and compliance issues
  • Great entry product for teens and pre-teens
  • Porting the prepaid “card” into mobile phones and other contactless form factors
  • Valuable service for underbanked segments
  • More utility: can be gifted, used for traveling, used to deliver allowance, and so on



1. The price controls apply only to banks of $10 billion or more.
2. I am really disappointed in the Durbin interchange price controls. I was sure Congress would delay the matter, but unfortunately I was wrong. My feeling is that price controls are an absolute last resort when there is not enough competition to create a free market price. I don’t think that was the case with debit interchange.

Long-term, the whole exercise is a zero-sum game for the businesses, merchants and banks, who will adjust their prices to cover costs and ensure a normal profit. The only likely loser is the consumer who will be deprived of innovations killed off by the dramatic shift in interchange.

Here’s my scorecard of the post-Durbin winners and losers: 

Short-term winners:

  • Merchants, obviously
  • Prepaid card issuers (which are not covered by Durbin price controls)
  • Consultants, lawyers, marketers and professional services firms involved in drafting and communicating new bank prices and policies 
  • Financial institutions exempted from Durbin (under $10 billion) could pick up share and/or be able to gain fee revenue by matching the large bank price increases

Short-term losers:

  • Large banks will see revenue declines until they can get new fees introduced and move transactions to credit/prepaid
  • Consumers who will see fee increases from banks faster than they’ll see price decreases from merchants
  • Payment startups and business consortiums whose business model was predicated on disrupting debit

Long-term unchanged:

  • Merchants who will eventually pass on the interchange savings due to price competition
  • Banks who will make up the revenue loss with new fees and/or by channeling transactions to higher-margin products
  • Consumers who will pay more in bank fees but less for goods and services, an overall wash

Service Credit Union Doubles Up on Black Friday Hoopla, Also Promoting Cyber Monday Offers

imageING Direct ran a slew of Black Friday offers again this year (see screenshots below; last year’s coverage). And they weren’t the only one. Service Credit Union also ran a homepage-dominating ad for its 6 AM-to-noon “doorbuster deals” today:

  • 10% APY 3-month CD with maximum deposit of $1000…$23 in extra interest compared to its regular CD (pre-tax)
  • Fee-free Visa gift cards (limit 5)
  • 1% rate reduction on new personal loans
  • $25 Visa gift card for opening a new credit card
  • Unspecified “in-branch checking account specials”

The credit union’s U.S. branches opened at 6:00 AM to mimic the retail craziness on the day after Thanksgiving. Specials were available until noon only, and all required a branch visit to redeem.

I was going to say something about the lack of online-redemption options, but luckily I checked back after noon and found that a Cyber Monday promotion had taken the place of the Black Friday ad. Online users are being offered similar specials on this coming Monday (aka Cyber Monday):

  • 7% APY 3-month CD with $1000 max deposit (a $17 interest bonus)
  • $100 bonus for opening a new checking account (requires direct deposit and estatements)
  • $25 Visa gift card for opening a new credit card
  • Free personalized credit card design for first 100 members ($9.95 value)
  • $25 Visa gift card for a referral

Bottom line: The dual promotion was a clever way to involve both online and in-branch members.

Service Credit Union placed a bold advertisement on its homepage promoting its Black Friday deals (10:00 AM Pacific, 26 Nov. 2010)


Later in the day, the CU posted Cyber Monday specials on the homepage (1:00 PM Pacific)


Landing page (link)


ING Direct homepage on Black Friday (26 Nov. 2010


Landing page (link)
Note: Offers are good for the entire weekend


Giving the Gift of Microfinance: 2008 Update

image With capitalism bruised and battered in the past year, it’s more important than ever to teach our friends and family about the ultimate upside of business and commerce, the potential to lift families out of poverty permanently. And the need is high, as always.

Unless you have your own personal foundation, there is no better way to do that than by spreading a bit of your wealth around the globe through microfinance companies such as, eBay’s MicroPlace, and a host of others.

This holiday season the major microfinance companies are making it easy to spread the word, and the money, with gifting options. And with Christmas just a week away, here’s a last-minute option that doesn’t require a trip to the mall. 

Kiva <>
Kiva is using the same approach as last year, but with an updated paper gift certificate (see below) that can be printed and given to the recipient or sent directly through email. It’s a simple solution that works fine for its rabid fan base. The homepage (below) features a prominent link to the gift page and a counter across the top tracks number of certificates purchased this week (more than 13,000!).

MicroPlace has a snazzier gifting landing page (see below), not surprising given its eBay backing. The microfinance nonprofit is promoting gift options heavily across the Web, with a large banner last week on the search results page at (see below) and a costly top banner and right-side skyscraper ad on TechCrunch yesterday (see below).

Microplace is spurring giving with a small Chilean piggy bank that will be sent to the recipient along with an e-card (givers can choose not to send the bank). But the big difference with Microplace’s gift program is that it’s only a “gift in your honor program.” That means the giver chooses the entrepreneur to invest in, rather than the recipient. That gets the money invested faster, but it’s not as satisfying a learning experience, either.

Final comment: There’s not much here that needs improvement. But I do think it would be better to let the giver decide whether they want the recipient (of the gift card) involved in choosing who gets the micro loan. 

And financial institutions: Here’s a great cause to get behind. Not only does it make a difference, it shows you support the small business community.

Kiva homepage features gift option (17 Dec 2008


Preview your gift certificate before sending (17 Dec 2008)


Microplace ads at Barnes & Noble (early December 2008)

 image       image

Banner on top of TechCrunch (16 Dec 2008)


 Microplace gifting landing page (17 Dec 2008)


Expensify Launches Decoupled Credit/Debit Card Using Prepaid Model

image Like Rate Surfer, which we wrote about yesterday, Expensify launched its new employee expense-management system from the TechCrunch50 DemoPit this week.

The San Francisco-based startup (note 1) combines a payment card with a Web-based expense manager and uses cellphone cameras to upload pictures of receipts to match against purchases. It’s a banking triple play: card, online, and mobile.

The target market is smaller businesses that want to automate expense report preparation, approval, and reimbursement to their employees.  

How it works
The heart of Expensify is a prepaid, decoupled credit card. I know that doesn’t make sense, but here’s how it works: 

  1. Sign up for an Expensify MasterCard prepaid debit card.
  2. Load it with value from any credit or debit card, Visa, MasterCard, or American Express. 
  3. Make purchases with the Expensify MasterCard.
  4. As each purchase clears, the prepaid balance is lowered, triggering an automatic “top off” charge of an equal amount to the consumer’s credit card, thereby returning the prepaid balance back to the original level.

Metabank is the issuer; here are terms and conditions.

At first blush Expensify sounds pretty amazing. An expense management card that rides on top of your regular card, with mobile and Web-based integration. Brilliant, until you start thinking about costs. There’s that pesky thing called interchange. What Expensify has done is create two card transactions instead of one, doubling the amount of interchange paid.

To cover the extra interchange and create some revenue for itself, Expensify levies a 3% transaction fee on the cardholder. Although the card is otherwise relatively fee-free, that’s a significant surcharge.

Why would anyone pay 3% extra in order to use the Expensify card when they already have a credit card? The company believes that small businesses will pay the fee in order to get the expense-manager features and to help employees separate business expenses from personal ones. Businesses could have multiple Expensify cards tied to different categories of expenses (see screenshot below).

A business with just $1000/mo in expenditures would pay $360 per year. In addition, the business would tie up several hundred dollars in a prepaid account, because the only charges cardholders can make must not exceed the prepaid balance held in the Expensify account. 

I think the expense-management concept is good, especially with the mobile receipt integration, but it’s just too expensive in its current format. The founders should try to move to an ACH-based “topping off” process and remove the transaction fees. 

But regardless of how this specific product performs, the integration of payments, online and mobile, is a huge trend. If Expensify is nimble enough, they may be able to ride the wave.

Expensify homepage (10 Sep 2008)


1. Since I didn’t see contact info on their website, here’s what the founders provided at TechCrunch50: Expensify, 548 Market St. #61434, San Francisco, CA 94104, Phone: 801.745.9064

Scrooge Runs Bank Marketing at Most Large U.S. Banks

In our annual Christmas/New Years survey of bank websites (note 1), we once again find little use of holiday themes, especially among the very largest. Scrooge would be pleased with the homepages of the top four: Citi, BofA, Wachovia, and Chase which have no holiday images or messages.

Wells Fargo is the only top-5 bank with a holiday message. The bank wishes its customers Happy Holidays (see below) in a top-of-the-page banner rotating with two other messages: a savings promotion that also uses holiday imagery (below) and an investments banner (not shown). 

However, this year there is one top-20 bank fully embracing the holiday spirit. ING Direct homepage (screenshot above, download flash in note 2, below) features a full-screen animation that first strings Happy Holidays across the page followed by the ING Direct orange ball rolling across the screen, bumping into the tree trunk, and dumping a load of snow on top. It's very well done.   

Also, honorable mentions to:

  • Fifth Third and its $10,000 holiday sweeps
  • Regions Bank, which is running a Toys for Tots banner across the top
  • PNC with its annual tongue-in-cheek Christmas Price Index

Additionally, WaMu and Key Bank use winter imagery. And HSBC, US Bank, SunTrust, BB&T and Citizens are all running small banners for prepaid gift cards.

Wells Fargo

Wells Fargo homepage banner

Fifth Third


PNC                                                              WaMu


Key Bank

HSBC                          SunTrust            US Bank


Citizens Bank



1. Websites observed at 9 AM Pacific Time, Dec. 24, from a Seattle IP address.

2. View the ING Direct holiday animation (here)

Why Are Only 1% of Prepaid Gift Cards Sold by Banks?

One of the biggest changes in the payments landscape during the past decade is the use of prepaid gift cards, especially during the coming holiday period. According to the National Retail Federation, $28 billion changed hands via prepaid gift cards during the holidays last year, almost $300 per U.S. household.

Assuming a $50 average load per card, the $28 billion holiday spending translates into more than 500 million individual cards. At a conservative $2 per card in revenues, that's $1 billion at stake during the holiday period alone.

It seems that banks and credit unions would be ideally suited to cash in on this interest. Yet, a recent Marketing Workshop survey revealed that only 1% of gift card purchases during the past year were at banks. Granted, it's difficult to compete with card sales at the end-retailer, but nearly a third of buyers used other channels, a significant revenue opportunity.

Here's a card-purchase breakdown from the last holiday period, according to the National Federation of Retailers (research conducted by BIGresearch, 10 Jan 2007).

  • 75%bought at the store where cards will ultimately be used
  • 17%other brick-and-mortar locations
  • 13%purchased online, retailer-direct
  • 4%third-party website

The directories at Visa and MasterCard (see list below) list only 19 financial institutions offering prepaid cards online. An additional 30 financial institutions sell cards thorough Visa's online site here.

Why such low FI sales?
Back to the original question, why aren't banks more heavily invested in gift card sales (see list of sellers below)? Part of the explanation has to do with the general unwillingness to take on the added fraud exposure, especially from online sales. However, financial institutions can mitigate much of that by offering the cards to established customers only.

Another reason is the lack of merchandising expertise. Bank branches and websites are generally not set up to merchandise spur-of-the-moment products. That weakness can be overcome online with tight integration into the online banking area. If banks had a "gift card" tab available in online banking, I believe it would become the primary option for many customers in the market for a gift card.  

Financial institution opportunities
Even though brick-and-mortar sales dominate with an 85% share of transactions, physical  locations by no means have a lock on the business. I recently purchased several store cards at a third-party location (Safeway). While it was convenient and free, I wasn't at all sure that the Safeway clerk actually activated the cards, a significant drawback in the buying experience. 

It's tempting to think banks could recreate the success of other retailers by selling cards in branch. But without the retail POS systems needed by card wholesalers to plug the bank into their card-selling networks, it can be costly to equip bank branches with a card-selling system. Add to that the expense of training tellers, educating customers, and potentially backing up the teller queue on Christmas eve.  

So the better opportunity for most financial institutions is online sales. You already have the traffic; the technology expense can be centralized in one fulfillment location (or outsourced); and it's easier to educate customers online. Online Resources is one established bank-tech vendor with a turnkey, multi-card solution, CardHQ, introduced last year.

Banks and credit unions could become players in this market if they did some or all of the following:

  1. Expand from Visa/MC/AmEx used by 12% of buyers, to store cards, used by 90% of the market (see list of card types below).  
  2. Provide written activation guarantees with each card.
  3. Allow users to check balances online or through text messaging.  
  4. Keep prices competitive. Safeway charged ZERO for the Nordstrom card I purchased there, apparently content with the commissions received from the retailer. Because of the activation guarantee, banks could charge a few dollars per card, especially if the card is packaged in an attractive envelope or box that reinforces the guarantee and the bank's brand (see #5).
  5. Use online banking to promote the cards. 
  6. Offer a variety of packaging alternatives and/or personalization to improve the cards appeal as a gift. Starbucks, the granddaddy of prepaid cards, is offering a $25 package in its stores that includes a personalized $20 card and a gift box. The package is bought in-store, but the personalization is fulfilled online.  

Card types
Here's the list of most common card types purchased (offline and online):

  • 38%—department store 
  • 27%—restaurant
  • 18%book store 
  • 16%—electronics store
  • 15%—discount store
  • 12%Visa/MC/AmEx
  • 11%coffee shop
  • 11%home improvement 
  • 9%clothing  
  • 7%grocery store
  • 6%gas station
  • 5%salon/spa
  • 5%sporting goods
  • 4%home decor/housewares
  • 3%craft store
  • 3%online merchant
  • 2%office supply
  • 2%catalog
  • 2%shoe store
  • 10%other 

Source: National Federation of Retailers, research conducted by BIGresearch, 10 Jan 2007

Companies Offering MasterCard or Visa Gift Cards Online


Western Union Prepaid Card

H&R Block Bank
H&R Block Emerald Prepaid MasterCard

HSBC Prepaid MasterCard GiftCard

Best Present Holiday Bonus & Incentive Card

AccountNow Vantage Debit MasterCard

All-Access MasterCard Prepaid Card

Washington Mutual
Washington Mutual Prepaid MasterCard Gift Card


BCU (customers only)
Available to BCU members only
Financial Institution

Comerica (customers only)
Phone: (800) 955-4212
Available to Comerica customers only
Financial Institution

Phone: (866) 874-9029

Desert Schools FCU (customers only)
Phone: (800) 456-9171
Available to Desert Schools FCU members only
Financial Institution

First National Bank of Omaha
Financial Institution
Phone: (877) 944-3822

Phone: (636) 536-6897

IDT Gift2go
Phone: (800) 995-3065

M&I Bank
Financial Institution

National City
Phone: 877-990-GIFT (4438)
Financial Institution

Navy Federal Credit Union (customers only)
Available to Navy Federal Credit Union members only 
Financial Institution

PNC Bank (customers only)
Available to PNC Bank customers only
Financial Institution

Phone: (800) 318-0210
Financial Institution

U.S. Bank
Financial Institution

Wells Fargo (customers only)
Financial Institution

West Suburban Bank
Financial Institution

Source: Visa, 3 Nov 2007.

Starbucks gets Creative with Prepaid Cards

Email_starbucks_cardWhen it comes to stored value cards, Starbucks is the one to watch. It’s most recent innovation: a Mother’s Day "card" with a place on the plastic where you can jot a quick note to mom (see close-up below).

Don’t you wish you would have thought of that?

The Starbucks stored value card, first introduced in 2001, is just now being positioned as a collectible. Stores in the Northwestern United States and in Japan are selling a sealed $10 prepaid card carrying the likeness of popular Mariner baseball player Ichiro Suzuki. The cards are also sold online at

We believe stored value gift and travel cards are a natural for online banking. They provide an interesting retail element unavailable with most banking products.

The Starbucks email (click on the thumbnail above) is a good example. What bank product would have worked so well in a Mother’s Day promo?

In additio to their marketing benefits, prepaid cards command fees and can be profitable; no small matter in the United States, the land of free online banking and bill pay. 

Starbuck_mothers_day_card_1Ironically, Bank of America recently dropped out of the retail prepaid card business, most likely due to increased state rules and regulations on dormant account fees, one of the primary profit drivers for banks.

Don’t let BofA’s move worry you. Just be thankful there are now 12 million more potential customers for the rest of the industry to share.