The role of the programme
manager is evolving as fast as the prepaid industry itself. Jane
Cooper looks at this bustling market and finds out what programme
managers need to do to stand out from the crowd, and where they can
really add value.
Go deeper with GlobalData
Life is getting tougher for
programme managers as they strive to define their role in the
rapidly-evolving industry of prepaid. Their position is being
squeezed by other players – like processors or bank identification
number (BIN) sponsors – who are now able to perform the tasks a
programme manager did in the early days of the industry.
The prepaid value chain is already
cluttered with companies all jostling for a slice of the pie and
now the pressure is on for programme managers to demonstrate what
they add to the process.
Mark Beresford, a director at Edgar
Dunn & Co, says he has noticed a change in the role of
programme managers in the last year or so. He notes that in the
formative years of the prepaid industry, programme managers acted
added value by making introductions and contractual arrangements
for their clients. “But things have moved on,” he says, adding that
it is now more difficult for programme managers to show they add
value.
In the past, when there were few
companies with specialist knowledge of prepaid, programme managers
stepped in to bring parties together and coordinate projects. It
could be argued, however, it is hard to prove what tangible value
this function adds to the process, and that is why this part of the
industry is, according to Beresford “under pressure”.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe elements that go to bringing a
prepaid programme to market have evolved with the rapid
transformation of the industry.
“Clients are more sophisticated and
knowledgeable of what is involved and more capable of doing it
themselves,” Beresford says.
He adds that, when issuing prepaid
cards today, the resources and technical components are more likely
to be outsourced to specialist providers, which allows the client
to act as the programme manager.
“The specialist providers have
simply got better at what they do and they are able to be more
flexible and accommodating to meet the needs of the client,” says
Beresford.
Definition
There is great variation in the
types of company that describe themselves as programme managers,
with a wide range of services that can fall under the general
definition of what a ‘programme management’ actually is.
Some programme managers are
consultants, advisers and coordinators, others are BIN sponsors and
have an e-money licence, while some are specialist prepaid
processors that also have the capability to manage the prepaid
programme for their clients.
With this range comes different
approaches to running a business in the prepaid world.
One approach is that of PrePay
Solutions, which does not have the need for a programme manager as
it performs many of the elements of the prepaid process itself.
The company, owned by prepaid
voucher provider Edenred and MasterCard Worldwide, is described by
its managing director Gilles Coccoli as a “one-stop shop”, which
provides programme design, processing, BIN procurement among other
services, and is an integrated prepaid-focused company.
“The space for programme managers
is getting squeezed a little,” Coccoli says.
The role of what the programme
manager does is getting blurred between the lines of what BIN
sponsors and processors are able to do. Also, many clients feel
they are also able to manage their own prepaid programmes, Coccoli
adds.
The role and definition of what a
programme manager does is evolving along with the nature of the
prepaid industry.
Beresford says: “As the prepaid
industry evolves the terminology of ‘programme manager’ will
equally evolve.
“Clients will become more familiar
with processing and issuing services as distinct service offerings
and will prefer to contract with those providers.
“Card production, compliance,
cardholder management and risk management, for example, will be
services that the processors and service providers are able to
provide and the actual programme management could be retained
in-house by the client.”
Some would go as far as to say the
programme manager is a dying breed and in many cases they are no
longer necessary. Beresford points out that a sophisticated brand
or customer service company is more than capable of acting as the
programme manager by managing the contracts of the different
specialist suppliers.
“The less experienced, perhaps
smaller clients will need more assistance in managing the different
components in the value chain,” says Beresford.
Under pressure
Ken Howes, a payments strategy
adviser, says a lot of the pressures on programme managers are
rooted in the economics of prepaid itself, and the difficulty of
getting a business case for a prepaid programme.
If a client wants to create a
programme, it typically has to involve so many other players who
all want to take their cut. If the role of the programme manager
can be combined with an e-money licence holder, or processor, then
that means one of the parties – and its associated costs – can be
removed from the chain.
It is difficult for a prepaid
programme to be profitable, which in part is due to the low volumes
of transactions on the cards and the relatively high costs of
processing. With the margins being squeezed, there is more pressure
on the programme managers to demonstrate what they will add to the
programme.
Large companies, with a big brand
and many customers may also have the expertise to project manage
their programmes, and may prefer to do all the tasks of a programme
manager in-house.
This scenario makes it difficult
for the programme manager to score this kind of client, but the
programme manager could also lose out at the other end of the
client spectrum.
The more inexperienced issuers who
are more likely to need programme managers, are less likely to have
the scale and volume required to make the prepaid programme a
success, and bring the profits that the programme managers need to
survive.
Coccoli says many programme
managers have been funded by venture capital and after the initial
years of investment, many companies are now exhausted – both
financially and strategically.
That, however, does not necessarily
have to be the case as many in the industry still struggle to put
their finger on what actually makes a prepaid programme a
success.
Beresford says it is possible for a
programme to be profitable with a portfolio of 10,000 cards. What
is important, he says, is to create a compelling proposition for
the cardholder, and target what drives them to use the card rather
than use cash or their bank account.
Executives, however, are still
finding a way of putting this into practice and creating a winning
formula. Coccoli comments that it can be a mystery predicting which
programmes will or won’t be successful.
“All of us have a lot of
unsuccessful programmes and a few that are supporting the whole
business,” he says.
Advanced Payment Solutions (APS)
CEO Rich Wagner says it is important to be selective in deciding
which programmes are feasible and worthwhile to take on. Wagner, as
the first programme manager to enter the UK prepaid market, has
built up his reputation over approximately five years and in that
time has noticed a number of changes.
In the formative years of the
prepaid industry it may have been tempting for programme managers
to take on projects because they offered volume and would raise
their profile as well as that of the prepaid industry in
general.
Wagner points out, however, that
the volume of programme is only worthwhile if each incremental
marginal account that is added also makes money.
“I think finding the distribution
channel that is going to provide scale and profit back to the
programme managers – a win win for them and the channel partner –
is key,” he says.
The preliminary research and
assessment in the initial stages of working with a client is
crucial for programme managers so they can really understand the
potential programme and its distribution. It is also an opportunity
for the programme manager to consider if they really want to take
on the client.
“We have never done a programme
where we did not feel that it was going to generate profit,” Wagner
says.
Wagner is candid in how it has not
been easy in the prepaid market for that to happen. He says his
company has had its first profitable year, and is the first
programme manager to do so in the five years since prepaid was
introduced to the UK. He comments this is not a good reflection of
the UK prepaid industry in general.
Changing faces
There have been a number of factors
that have made it difficult and now the types of business that
programme managers seek out has changed in recent months. Where
there might have been a lot of interest in consumer programmes
previously, the programme managers are looking for the clients with
the distribution.
“Distribution is the key factor –
gone are the days of just selling on the internet,” says Beresford.
“Whether it is through a county council payroll or benefit card
programme – those types of programme have been relatively
successful and self sufficient,” he adds.
These government prepaid programmes
are becoming more attractive for programme managers. Howes argues
that the consumer cards are a more difficult proposition as there
are limited segmentation opportunities.
Many consumers already have payment
cards that are issued on the Visa and MasterCard networks and so
there is no compelling reason at the moment for them to have a
general-purpose prepaid card.
For the segments of the population
that do not have bank accounts or payment cards – the teen market,
for example – the challenge is for the programme manager to achieve
the scale and volume that makes it worthwhile.
“The key to success in being a
prepaid programme manager is to have the capability to support and
manage very specific types of programmes without relying on general
purpose,” says Howes.
For a programme manager to be
effective they need to demonstrate that there is a specific added
value. “Today, the more successful programme managers are able to
clearly demonstrate value through a specific service or ‘value add’
functionality to the programme,” says Beresford.
“This could range from a number of
different service offerings, such as loyalty, fraud and risk
management or simply contract management.”
Some of the value added services
could come through the marketing or the analytics of such
programmes.
Wagner’s view is that in this
changing environment it is important for a programme manager to
have the capability to deal with the range of clients that are
likely to need a prepaid programme.
Wagner and APS have worked with a
range of clients – from those with a large distribution and
experience and who know what they want, to working with smaller
clients who may need the programme manager to do everything for
them.
“You have to accommodate that range
of experience,” says Wagner.
One of APS’s strengths, he adds, is
that it is able to identify what the client actually needs, rather
than what they think they want when they first come up with an
idea.
Wagner says one client wanted a
prepaid card but when an assessment was done of what the needs of
the end user actually were, it turned out the client did not need a
card but rather a virtual bank account that offered a bill-payment
solution.
Wagner adds that recent changes in the industry mean that
companies such as his are finding more opportunities in Europe (a
growing trend among programme managers). As the industry continues
to evolve, so too will the role of programme managers.
