Citi made a name for itself in the prepaid
area, having expanded in areas like Central and Eastern Europe. But
Steve Donovan, Citi’s head of global transaction services for the
Middle East and Pakistan, is now setting his sights on growing the
company’s corporate prepaid business in the region through
programme management.

As one of the few ‘big bank’ issuers
of prepaid cards globally, Citi has made its name as a pioneer of
prepaid in emerging markets, offering both consumer and corporate
prepaid solutions to individuals and business entities across
several diverse markets.

Central and Eastern Europe have long been
cited as fertile growth hotspots for prepaid, and with prepaid
having definitely made its mark there, eyes are now turning towards
other promising destinations – with the Middle East and Pakistan
regions attracting a lot of attention (see CI430).

In September, Citi appointed Steve Donovan, a
20-year industry veteran, as head of its Global Transaction
Services (GTS) division for the Middle East and Pakistan, based in
Dubai. GTS deals wholly with the corporate side of the payment
business in areas such as treasury and cash management and does not
issuer consumer payments cards of any type.

Formerly, Donovan led the Europe, Middle East
and Africa (EMEA) sales organisation for Citi’s treasury and trade
solutions, and prior to joining Citi in 2007, he held a number of
senior transaction services roles at JPMorgan Chase.

“Recently I was asked to come and run the
transaction services franchise in the Middle East and Pakistan,
which covers our securities funds services businesses, our cash
businesses, and our trade businesses,” Donovan told CI.

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“Under that umbrella we have multiple products
and solutions, one of which is prepaid, which was actively launched
in EMEA realistically this year, and which we’re now looking to
launch across key markets in the Middle East.”

Regulation driving prepaid in Middle

According to Donovan, it is
regulation by Middle Eastern central banks which is propelling
prepaid as a viable financial tool in the region.

“The key market would be the United Arab
Emirates [UAE], where the wages protection scheme regulation has
been ratified by the Ministry of Labour and the UAE central bank,”
Donovan told CI.

“This is a regulation which is non-negotiable
and determines that all payroll instructions have to be routed
through the central bank.”

Given the millions of migrant blue collar
workers currently in the Middle East region, who are traditionally
paid in cash, and the fact that the unbanked form a sizable
percentage of that workforce, the opportunities for prepaid are

“The regulation that has been introduced in
the UAE will now prohibit those types of cash payments and people
will have to be paid by electronic means,” Donovan explained.

“That brings with it know-your-customer [KYC] and anti-money laundering [AML] issues, as these are fairly
low-paid workers and there is not a huge appetite to open bank

“We have been looking at alternative means and
that is where prepaid cards become a very attractive

He continued: “Payroll is an obvious
opportunity. Regulation presented us with that opportunity – the
regulation kicks in at the end of November.

“There is a critical mass in markets like the
UAE. If you look at the prepaid space it is predominantly a game of
scale, and the scale is in the unbanked population in parts of this

Donovan told CI: “We are looking at direct
engagement with companies that have 100-plus employees and
providing them with our prepaid card products.

“Those entities own the AML and KYC process
but we basically provide the tools and technologies to automate
payroll collection. We are also working on indirect engagement,
working through payroll bureaus, through aggregators, working
through other banks, again to provide what is a proprietary card to
enable them to adhere to the regulations that have been

But it is not just prepaid payroll solutions
that Donovan is setting his sights on – he also highlights the
opportunity for Citi’s GTS unit to expand across the entire Middle
East, Pakistan and Africa region across a range of sectors.

“We are looking at unemployment benefits, per
diem opportunities, and working with airlines such as in lost
luggage opportunities to automate the cash compensation programmes
that exist in many countries around the world right now,” Donovan

“We are looking at loyalty, and we are
potentially looking at gift. There are a number of different
programmes that we are looking at right now, some very specific to
this part of the world.”

Although Donovan declined to give an exact
number for issued cards in the region, he did say that GTS has
signed four contracts related to prepaid payroll programmes and is
in active implementation mode.

Citi primed as programme

In the prepaid space, Citi is known
primarily as an issuer, but in a remarkably bold move, the company
is positioning itself as a programme manager for other financial
institutions in the Middle East/Pakistan region, and carving for
itself a unique position where it will issue its own prepaid
solutions and also provide white-label programmes to corporates –
including Citi’s bank competitors.

“I look at markets and certain sectors within
key markets that are inaccessible to me that will enable me to look
at reciprocal arrangements with other financial institutions,”
Donovan told CI.

“Let’s look at a market like Saudi Arabia. I
have a proprietary prepaid card – circa 25 percent of the Saudi
population today is foreign workers, and 90 percent of that 25
percent is blue collar, who are predominantly paid in cash.

“Opportunities for me beyond the traditional
prepaid space would be to look at white-label applications with
other financial institutions.”

However, in Saudi Arabia, which is a
non-present market for Citi, the bank has historic ties with Samba
Financial Group. Doesn’t that mean that anyone who provides
white-label solutions in Saudi Arabia is potentially competing with
Samba? Not according to Donovan.

“It could be Samba that we white-label this
product to,” he told CI. “It could be a number of financial
institutions, but what we’re looking at is where we can give back
to economies that are important to us.

“We are looking at how we can work
collaboratively with financial institutions in a market like Saudi
Arabia to provide an application which will give financial
institutions a competitive advantage in their domestic

Nevertheless, it represents a major strategic
move for Citi in the region in that it is willing to become a
processor/programme manager in markets where it doesn’t have a
presence – a strategy that Citi has not adopted in other global

“It will become a broad-based strategy in
other markets,” Donovan said. “If I look at a three-year strategy
for my business and I look at my organic growth strategy over the
next 36 months, it will only get me so far. I need to basically
supplement my organic growth strategies with simplistically
inorganic growth strategies.

“If we continue to do what we have always been
doing in regions like this, we will not be growing at the pace that
the franchise is demanding in many ways. We need to reinvent and
recreate ourselves in key markets so we can differentiate ourselves
from our principal competitors.

“If I can go armed with a proposition that
gives indigenous banks a competitive edge in their domestic
markets, in an area like consumer which is a vast area of
opportunity and focus for the local banks, then my ability to ask
for reciprocal business from local banks in Saudi Arabia, such as
dollar or euro clearing, has got to be a benefit to both of us,” he

Citi’s challenges and

According to Donovan, the greatest
opportunities for prepaid solutions in the wider Middle East region
lie in the public sector space.

“You can work in the traditional corporate
space, and you can look at a number of different applications that
would be relevant in the traditional corporate space,” Donovan told

“If you are looking at scale, then you would
certainly get scale in the public sector space working across
various ministries, where these applications can bring a tremendous
number of benefits. That is a statement that I can comfortably
stand behind. There is a benefit in every single market, but public
sector for sure is our biggest opportunity.”

Citi’s vast scale has also enabled it to view
prepaid as a scale game, and to tailor its solutions

“We can issue Visa or MasterCard cards
depending on the transaction,” Donovan added.

“To me it is a scale game. We are not talking
about a commoditised plastic card as is the case with commercial
cards which have been around forever. We can’t call prepaid cards a
commodity because it isn’t. The functionality is quite
extraordinary. Your ultimate strategy is to build scale. It is no
different for a cash management business. For the right
transactions, we will structure the right deal.”

Citi’s experience in prepaid has also enabled
it to launch products off the same standard platform used in
Western European markets, and given that GTS is not involved in
consumer prepaid cards, it can also shrug off challenges related to
the lack of availability of cash reloading networks, which has
hampered the growth of some direct-to-consumer programmes

However, Donovan concedes that this would be
more of a problem for its white-label partners.

“For Citi it is not a challenge because we are
looking at it from a corporate angle, but from a consumer
perspective which is not a space we are operating in, then there
are implications, yes,” he said.

What are the prospects for things like
contactless in relation to POS and ATM infrastructure in this

“I think there are challenges but there are
also opportunities,” he told CI.

“In terms of certain markets, the network is
quite mature. Going back to payroll and if you fully understand the
labour camp infrastructure, then there is an opportunity to look to
invest and install an ATM network directly into labour camps.

“That again gives you an opportunity to again
collaborate with a partner or another financial institution and
open up corridors of opportunity through that type of

However, Donovan is more reticent about the
prospect of prepaid leapfrogging plastic cards altogether and
becoming a predominantly mobile-phone based offering.

“I think for a small percentage of a given
industry, yes. For certain countries, yes. But again it needs to be
broken out by application,” he said.

“If it is payroll and if you are looking at
migrant workers, then I think the answer is ‘no’ for the
foreseeable future. I think for different types of classes of end
user, the answer is ‘yes’ and we are seeing evidence of this in
markets like Kuwait, Pakistan, in markets where we have been in for
a number of years.

“We are actively investing in this type of

Donovan also points to the global economic
turbulence of the past two years, which hit the Middle East region
particularly badly, as reshaping the region’s economies in ways
that will benefit the uptake of prepaid.

“If you look at the pace which these economies
had been growing at over the last few years, it was never going to
be sustainable,” he said.

“These markets now need to take a step back
and rethink future strategy, but also take a closer look at how
they can become more efficient, how they can take costs out of
their enterprises and how they can do things more cost

“I think it is a good opportunity in the
prepaid space for companies like Citi to engage with all levels
within the marketplace, be that public sector, financial
institutions or other corporations.”

Steve Donovan