SQUARE CASH LAUNCHES: A lot of you are probably familiar with Square, the company that makes those credit card readers you can plug in to your cell phone. Some of you may have even tried running prepaid debit cards through a Square reader just for the heck of it. Square is now branching out with Square Cash, a service that lets you send money from one debit card to another.
What we know so far:
- No fees
- $2,500/week limit.
- Early reports are that most, if not all, prepaid cards do not work.
Here’s the Flyertalk thread, and here’s the Fatwallet thread. Square did a respectable job of shutting down point-seekers with its card readers last time around, so I imagine the company’s given some thought to sniffing them out this time around.
HOW NOT TO GET SHUT DOWN: On that note, Dan’s Deals had a solid blog post on how to avoid pissing off your bank. Even veterans may learn something–I, for one, was not aware that adding too many authorized users could trigger a dreaded Financial Review (yes, the FR gets capital letters) from Amex. (Thanks TBB)
HOW MUCH MONEY CAN YOU MAKE BY ISSUING PREPAID DEBIT CARDS?: A payment consulting company called Prinéta has an article targeted at larger companies with some interesting nuggets about prepaid cards. For example, can you guess why companies might want to pay their employees via debit cards?
…You can make 25-40% of the issuing bank interchange revenue with your own program. This really adds for employers with more than 1000 employees. Think about it, what if you could get a percentage cash bank on all dollars spent on the prepaid debit cards you issue to employees.
And in case you’re considering launching your own prepaid program:
For the initial $30K investment, you make income on fees and interchange (basically, a percentage of aggregate spending on the card). Interchange revenue on prepaid debit cards is 1.15% + $0.15 per transaction for Card Present Retail and 1.75% + $0.20 for Card Not Present (e-commerce for example). If you have your own custom prepaid program, you make between 25-40% of the interchange fees paid to the issuing bank in revenue sharing depending on volumes. The more your cardholders make purchases for goods and services, the more money you will make. The more cardholders you have, the more money you will make. The revenue and profits are largely based on your ability to bring distribution and reach to the unbanked and underbanked demographic. As part of our scope of services, we can help you estimate the number of cardholders with conversation rate assumptions, average spending per cardholder, and all the inputs to develop the business case. Across multiple clients, the average revenue per card holder appears to be around $8/mo with some closer to $25/mo — it just depends on how much is spent on the card and your fee structure. If you do this right, this can be a good business that makes good money. The key is having a channel into the demographic that prefers and uses GPR debit cards.
But wait, there’s more! Check out this article detailing how much convenience stores can make:
Our average merchant makes 10% a month off prepaid sales blended across all the products. So if you sell $1000 worth of cards you would see about $100 commission.
…though that number seems to be inflated by calling cards. If the article is to be believed, the seller only makes around a dollar or two selling a prepaid reload. Anybody else heard or seen any other numbers on this?
And by the way… who’s interested in getting a very prestigious PFD prepaid debit card?