of the foremost prepaid card issuers in the UK, and it is now
looking to extend its reach across Europe. Victoria
Conroy spoke to Kriya Patel, head of cards solutions,
about his view of the development of prepaid so far, and how the
organisation is looking to drive further growth.
Newcastle Building Society (NBS) recently celebrated the launch of
its 100th prepaid scheme with the advent of the Tesco Travel Money
card in the UK. For a relatively small UK building society, NBS has
leapfrogged over its larger bank competitors to become acknowledged
as one of the pioneers of prepaid.
CI: Can you explain a little about what NBS does and the
kind of services you offer in the prepaid sector?
KP: NBS is split into two business areas; there is the member
business, such as savings, mortgages and insurance, offerings which
in essence are our bread and butter as a building society. Cards
fall under our solutions area, where we provide managed bank
accounts and online banking systems and services for third parties,
along with an outsourced call centre. Customer service is another
offering we have, as the two business areas of systems and services
lend themselves very well in terms of the expertise NBS has
across both processes.
We are principal members of MasterCard, and we work with two
processors at the moment, Metavante and Symmetrex. As the issuing
bank, we are effectively sponsoring the programme managers’ schemes
with MasterCard, be it on Maestro, MasterCard or Cirrus rails. We
manage the sponsorship and coordinating project work that
is undertaken with MasterCard, ranging from member service
provider registration to things like the card approval initial
vetting, marketing collateral approval, training for anti-money
laundering and know-your-customer (KYC) processes and so on.
We bring expertise to prepaid via a dedicated compliance team,
we are regulated by the Financial Services Authority (FSA) and we
also abide by the UK Banking Code. Everything we do, right down
to the charges and tariffs to levy, we look at from the point
of view of treating customers fairly and where it sits from the
point of view of the FSA guidelines we adopt.
We work hard to get programme managers through the launch phase, we
do all their marketing collateral vetting, we give advice on
standard terms and conditions, we review their charging structure
to make sure they are treating customers fairly, and we won’t let
them bring in excessive charges. If we are not comfortable with it,
we will not approve it. Because of our expertise and relationship
with MasterCard, we have built up a lot of trust. MasterCard have
certain rules regarding what collateral can and can’t say, and
we have built up knowledge regarding those processes to be able to
advise clients accordingly.
We provide a wrapper, so to speak. We provide solutions from a
compliance point of view as far as UK regulations go, and we have
now taken a step into Europe with our SEPA licence, so we can
now also look at Europe. As an issuing bank, for us to passport
into those regions, we review local requirements in order to
help programme managers who are looking to launch in those areas.
We always try to be as transparent as possible. Once the programme
is live, we provide support or undertake the ongoing monitoring,
transactions settlement, complaints management and
reporting, KYC and so on.
We have gained expertise and knowledge in prepaid over the last
three years, and now we are looking at what other opportunities are
available in other card areas, such as debit cards, and how we can
explore this market.
CI: Given that NBS launched its first prepaid programme in
2005, how does the sector back then compare to the amount of
prepaid activity happening today?
KP: We have a pipeline for next year which is on similar lines to
what we have already got on our books this year. In July 2008 we
marked the launch of our 100th card scheme, and since then we have
launched another two, and we have got another three schemes to go
live shortly. It is a really good position to be in. This
year, we have concentrated on growing our team and
supporting what is going on, because to manage 100 schemes with 22
programme managers takes a lot of effort.
We have gone from consumers not being sure about what prepaid is
all about to a point now where the bigger corporates are
interested. I know from the interest we have had this
year that there are definitely more opportunities out there – the
difference in the level of interest compared to a few years ago is
phenomenal. I’m quite surprised about the number of different
financial institutions that are approaching us as well, and not
just the UK-based ones either. It’s worked well for NBS as we are
recognised as one of the premier issuers, and that affords us the
position of being able to pitch ourselves with the services you
wouldn’t necessarily expect from someone like Newcastle Building
We’ve gone from asking what prepaid is all about, and
launching the first product in 2005 with the Bullring gift card, to
now doing things like the first prepaid PayPass launch this year.
There has also been our involvement with the MasterCard rePower
initiative, and of course SEPA. It is quite an eye-opener because
every country has varying policy, but from a consumer point of view
it is a great way of learning about how different markets are
maturing and evolving. One of the things we have noticed is that in
certain Eastern Bloc areas there is this mystery about financial
services. Prepaid is almost like a bridge between having cash and
being classed as fully banked. It is a really good middle layer to
It is interesting that we are now seeing people from the US who are
interested in speaking to us. I guess the difference between a
magnetic-stripe driven US to the European market’s chip and
PIN is a challenge and learning we have to take to
understand how the two lend themselves to each other.
There are lots of initiatives coming out in the US that do not
necessarily transition over to Europe so well, but it is good to be
able to start thinking about those things now, and it is also good
to help facilitate learning with programme managers, so they know
and can start spreading the message in their areas.
CI: With NBS being a relatively small building society, how
did it get into BIN (bank identification number)
KP: There was a project in our operational plan for 2004-05 to
explore launching our own debit card product. I was charged
with undertaking the research and project management for the
implementation of that service. I spoke to Visa and MasterCard at
the time, and also spoke to the processors out there, and Nomad
(now Metavante) and MasterCard were who we chose to pursue the
We went down the route of becoming principal members of MasterCard
primarily to issue our own debit product. But very quickly through
working on that project and going through the registration process
with MasterCard, the opportunity to get into prepaid came up.
It was working in the US, and MasterCard approached us about
working towards introducing the service in Europe, and that they
thought we’d be an ideal partner to trial this with, along with
Nomad. The programme manager was Flexi Vouchers, and that led to
the launch of the Bullring card in 2005.
Prepaid was always something that NBS was keen to be involved with,
as we have always wanted to push the boundaries. We were the second
building society in the UK to launch an internet account, and we
were only beaten by a month. Prepaid was another opportunity for us
to go out there and be innovators. That interest then led to so
many other business opportunities and it has paid off for us. But,
even though we are now in 2008, we still do not have our own debit
card product! The reason partially is we have been phenomenally
busy doing everybody else’s prepaid product!
We will look at this again in 2009. I know the minute we have that
debit card platform out there, it is another income stream for us.
And the fact that the UK has such a mature debit culture means it
could also be another ideal product for us to take into
CI: Can you tell us more about the recent Tesco Travel
Money card launch?
KP: That was our hundredth card scheme, and it is great to have
Tesco as a prepaid brand. That really starts to show the perception
and potential of prepaid when you are getting the likes of Tesco
interested. Travel cards work for them, it works for us and from a
programme management perspective as well.
So it is a good opportunity for us, but the main thing is the kind
of opportunities that are coming up are things we weren’t really
expecting. But we are grasping them when the model is right. Tesco
is a prime example of that. It shows that we are making strides in
the right direction.
Whereas a lot of people have maybe focused on gift cards or other
areas, we do not want to put boundaries on what we do. We are happy
to learn with the programme manager to achieve whatever it is they
want to get out into the market but ina controlled and de-risked
CI: Have you had to turn away programme managers or
potential clients because they have not fully understood what
prepaid is or how it can work for them?
KP: At the moment we get between four and six leads a week, which
would be impossible for us to manage in reality, and you have to
ask how many of those are really going to bear fruit. Some have the
mindset that they are going to have millions of cards out there,
and the reality is completely different.
What we try to do is understand what they know about cards and
urge them to do their research and fact-finding before we even get
into due diligence. We need to get an insight into what they are
offering, and nine times out of 10 we recommend they speak to an
existing programme manager.
We have got different programme managers who have different areas
of expertise, so we try and direct the prospective customer to the
appropriate silo that we already have, and that works well. That
helps to increase their understanding before they approach us
again, and if we think that they are very naïve as to what the
service is, we tell them.
We would rather be open and honest about whether there is any
mileage in moving forward with the offering, than try and string
people along. With the 22 programme managers we have got, we have
the right experts and the right product offerings out there.
At the end of 2007 and start of 2008, everybody wanted to do the
migrant worker card, and then the reality was that there were only
so many migrant workers that some products were suitable for. I
think this year and rolling into next year, there will be a lot of
interest in debt management, and mobile banking.
I think there will be some people who will really do well in that
market, and maybe for other people their timing might be wrong or
their offering might not work. It is about finding the balance –
are you going out there because you have the right offering which
will capture enough of the market, or are you just going out there
for the sake of having a product out there because you know there
are similar products out there?
We do not want to have an open-ended list of programme managers.
What we want is a core of programme managers who can sustain and
survive with propositions that make commercial sense and bring in
the volumes we expect. What we are seeing now is that fewer people
are coming to us with unrealistic expectations. They are thinking
about the bigger picture.
CI: Is there any potential for NBS to become a programme
KP: We do programme manage our own scheme and we also do a credit
union scheme at the moment. But there is not a great desire to do
that at the moment, as we are pretty busy as it is! But I suppose
it is a case of ‘never say never’.
At the moment, there is not the need because we have got a core of
good programme managers that we can rely on. If that was to change,
then maybe our strategy would change.
Ultimately, we do not want customers to be disadvantaged so if we
start seeing a downturn from a programme manager point of view,
then maybe we will step in and have our own offering. But it is not
really required at the moment.
CI: Which areas of prepaid do you see as having potential
to grow over the next few years?
KP: The new ones we have noticed this year include mobile banking
operations. That is a new market, and we know that we can
transition some of the expertise from people who are doing general
spend products or e-wallet products out there.
The other side is debt management. There was a spate of companies
this year who are interested in that, and I can see that market
growing. The activity in that area can be quite large, just because
of the nature of the spend on those cards. It will be interesting
to see how that market unfolds next year.
We have just taken a resolution through our risk audit committee in
the last quarter about gaming. Our policy before was that we would
not look at gaming. We have presented that to our board and we have
been given approval for a pilot project of some sort on gaming. It
is a tentative approach but we already know from the data that we
get that a lot of general spend products do end up being used at
gaming sites, so we know there is consumer interest in it. Where
there are winnings to be paid out, we are looking to see whether
that can be put onto a card, how it would work and what the risks
associated with it are.
We have also been doing some research offshore and meeting with
gaming companies to ask whether prepaid could lend itself to that
market. We are definitely keeping a close eye on it. We are happy
to do a pilot project but whether that develops any further, we
will have to wait and see. If we can mitigate any negative
connotations associated with gaming, we would be interested in
CI: Whose responsibility is it to educate consumers about
prepaid? The card schemes, the issuers or the programme
KP: It is everybody’s responsibility. Everyone in this sector
should be equally trying to push its merits. It is part of our
strategy now to be more proactive with the message about what we
are doing. Customers need to be actively encouraged, otherwise
there is no point trying to get cards out there in the first
It isn’t always about the number of cards people get into the
marketplace, it is about how many people will be interested in the
product and will actually use it, or the bolt-on added value
services that may enhance the appeal to consumers.
You create a product to meet your market, as opposed to saying,
‘here’s a market, let’s try and capture it all’. That just confuses
the consumer and you end up capturing nothing. In the early days,
that was very much the case. People wanted to have one product to
do everything and quickly realised that would not work.
It is great that we have been recognised in the industry and have
won various awards, but what we want is to have products out there
that work. It is great to be associated with these new initiatives
that are coming into the market, but then those new initiatives
need to become steady income streams, otherwise you have lost the
main reason for doing it in the first place. What we are seeing is
more and more offerings turning into steady income streams, which
is more important for us.
I was recently asked whether NBS is restricted by the fact we are
FSA-registered, we abide by the Banking Code and so on, and I
disagree – I would rather we have solutions which are fully
compliant, than run the risk of cutting corners and risking
customers being disadvantaged. What we have got is a very good
sound offering, which is not to say that our rivals haven’t, but we
approach things from different angles. We have been able to build a
large high-quality client base, which naturally makes more people
gravitate towards us.
Our key competitive difference is that we have been in prepaid from
the very beginning, we have retained a lot of knowledge, and we can
use that knowledge to make life easier for our schemes. If you look
at our growth over the last few years, that speaks for