First Data’s award-winning prepaid platform offers new and valuable insight into the challenges and potential of prepaid platforms in emerging economies with demonstrable benefits for financial institutions and merchants
Financial institutions around the globe are testing new cashless payment infrastructures to find efficient and reliable ways to provide convenient spending power to the 2.5bn "unbanked" adults worldwide.
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One such cashless solution, developed by First Data for the Indian market, was recently recognized with a Highly Commended Award for Best Prepaid Product of the Year APAC at the 2014 Cards & Electronic Payments International Asia Trailblazer Summit & Awards.
The First Data system supports the end-to-end prepaid lifecycle and spans card issuance, construction of acceptance networks, and management of settlement and clearing across all parties. The system’s efficient back-end operations are matched by a front-end web portal, seamlessly integrated to give all stakeholders — banks, merchants and consumers — anytime, anywhere access to critical transaction data.
India: A Proving Ground
The unique solution developed by First Data India offers new and valuable insight into the challenges and potential of prepaid platforms in emerging economies. Amid the worldwide shift toward cashless payment infrastructure, India has emerged as a proving ground for new forms of cashless payments.
The Indian economy is still largely cash-based (in 2010, 99.7% of all transactions in India were cash-based) and today, more than 40 percent of its 1.2bn people remain unbanked.
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By GlobalDataBut driven by consumer demand of a relatively young population (two in five Indians are under age 19), the volume of prepaid card transactions will grow approximately 40 percent through 2016.
With consumer spending in India expected to double by 2025, there is a significant opportunity to implement an effective cashless payment infrastructure that adapts to the rapidly evolving landscape of mobile technology, consumer demands and international e-commerce.
With this growing demand, other prepaid products have hit the market, but have required stakeholders to take a piecemeal approach -choosing a product for physical card issuance, another for POS terminals, and still another to handle settlement and clearing services. Existing infrastructure poses another challenge, as banks and merchants resist making large investments in new or upgraded infrastructure for fledgling prepaid platforms.
First Data addressed this challenge with the goal of developing an end-to-end prepaid solution that required minimal infrastructure investment or technology upgrades.
This approach provides financial institutions and merchants with a cost-effective and profitable platform and empowers consumers with a convenient prepaid product.
Developing an Agile Prepaid Framework
Noting the projected boom in consumer spending in India, First Data began with a framework that allows stakeholders to quickly and cheaply scale up to meet growing transaction processing volumes. The VisionPLUS-based platform uses a mainframe-based processing system that can handle exceptionally large volumes, allowing businesses to set aggressive growth goals without necessarily requiring future investments.
On the merchant side, the platform was developed to leverage the existing payment infrastructure — from POS terminals to processing networks — available in the APAC region. Where necessary, First Data provided merchants with customized POS terminals equipped to accept both EMV and mag stripe cards with PIN.
To further enhance the merchant experience, two new terminal applications were developed to optimise acceptance and processing of prepaid cards. These applications are parameter-based and can be customized to fit the unique needs and workflows of clients and merchants. Guided by First Data’s dedicated Solution Review Board and supported by a 24/7 support team, these terminal applications provide impressively low time-to-market for compared to other customized developments.
An Empowering Web Portal
Recognizing the value of empowering all stakeholders with actionable and highly accessible data, First Data developed a PHP-based web portal to integrate seamlessly with its VisionPLUS prepaid platform. For banks and merchants, the web portal provides a wealth of transactional data in real-time, as well as robust reporting capability for MIS and reconciliation. This self-service feature enables a free flow of transaction information between banks and merchants, reducing communication issues and reducing the cost of merchant services.
For consumers, the web portal offers the familiar benefits of an online/mobile banking platform. Consumers can view transaction details, set spending limits on cards, and opt to receive SMS and email alerts. First Data developed this functionality to allow easy customization, as well as integration for clients with existing web portals. This makes the web portal an invaluable brand-building opportunity for driving 1:1 communications and a unified brand experience.
End-to-End Solution for Faster Processing
The largest differentiator of the First Data prepaid platform is its end-to-end coverage of the prepaid lifecycle. First Data facilitates initial enrollment, card embossing and card issuance — and can readily work with a client’s established third party for embossing/issuance. Customized POS terminals speed payment processing. Also, with First Data also handling settlement, the prepaid platform offers a unique auto-settlement feature. This means that funds are received by the merchant on T+1, directly to their accounts. By developing an end-to-end prepaid platform, First Data created a one-stop solution for banks and merchants and optimized the speed of payment processing and settlement.
Financial Institutions & Merchants Reaping Benefits
Both First Data’s bank clients and participating merchants immediately recognized the value of the end-to-end platform. Working with a single system, supported by First Data’s 24/7 authorizations, call center and field operations support, banks and merchants can improve operational efficiency and reduced operating costs compared to the non-integrated solutions previously available.
Upon deployment, the auto-settlement feature, which provides T+1 payments to merchants, gives merchants an extremely fast and reliable means of payment settlement.
Just as important, the faster auto-settlement means banks are not paying interest on pending card balances as they wait for settlement. The auto-settlement feature is dramatically cutting the lag between real-time transactions and virtual transactions, giving all parties truer pictures of their assets.
These unique benefits of the First Data platform come in addition to the standard advantages of prepaid cards. These advantages include the elimination of interchange costs, bringing more profits to both banks and merchants; a significant reduction in the risk of fraud and money laundering; enhanced customer loyalty and increased throughput; and a higher spend per transaction.
For consumers, the First Data platform’s web portal is making it easier to manage spending and finances, while offering increased convenience, reliability and security over cash or check-based transactions. The connection of the prepaid platform with existing online and mobile banking services are also allowing consumers to easily transfer funds across the span of the country — an important benefit in a nation in which 70 percent lives in rural areas, and more than 4 million domestic migrant workers regularly send money back to home to family.
Successful Implementation and Future Plans
The initial development of the First Data India prepaid platform was completed in May 2013 and successfully implemented for seven clients in markets ranging from government and education to private travel and canteens. Immediate plans include implementation with at least six other clients, and First Data sees potential demand for its prepaid platform in additional verticals like healthcare, military and EBT.
APAC: A Broader Opportunity
Buoyed by this initial success, First Data is actively looking at promising opportunities across the APAC region — and specifically in China, Singapore and Hong Kong. Following a similar trend as India, non-cash transactions in APAC will reach $300trn by 2020 — up from just $91trn in 2010. This huge growth extends beyond consumer spending, as governments across the region are shifting to prepaid cards for benefits payments, recognising this as a cheaper, faster and more secure solution than cash or checks. In India alone, the government plans to shift more than $2 billion in government payroll to disbursement through a prepaid program.3
Award Adds to Reputation for Innovation
The recognition of the First Data India prepaid platform with Timetric Cards International’s Highly Commended Award for Best Prepaid Product of the Year APAC adds to First Data’s growing success in the prepaid market, where it has implemented over 50 prepaid programs worldwide. Noting the immense opportunities in the APAC region, Senior Vice President and Head of First Data in Asia Pacific Marc Mathenz proudly accepted the award and pointed to the promise of continued innovation: "We are delighted that Timetric has recognized First Data’s implementation of this program," said Mathenz. "This program is just part of First Data’s commitment to continued innovation in the APAC region — a commitment to creating solutions that increase revenue for merchants and provide greater consumer satisfaction — a true win-win."
