Building Blocks to a Successful Prepaid Program – Part II
As an experienced processor for a wide variety of international companies, we have obtained a wealth of knowledge over the years. We have learned that effective program management requires daily attention to program performance numbers, statistics, trends, customer feedback, and usage behaviors. This requires a lot of time, expertise, and on-going commitment if you want to do it right.
In Part One of our series, we presented the three main components for generating revenue. Today’s post covers aspects of a prepaid program that relate to cardholder use.
One of the first aspects of the prepaid program is to pay attention to is card activation rates. Once the acquisition costs have been incurred, the card needs to be activated to start generating revenue. Research shows a significant number of cards purchased are never activated. Too many program managers do nothing to encourage the activation of the card.
As soon as cardholder information is obtained, reminders should be sent until the card is activated. If the card is never activated, then the acquisition cost is negative right from the start with no potential to recoup it. The time frame for when an unactivated card should be closed out should be part of the strategy so that the program manager does not continue to pay any fees associated with it by their processor.
Every program has a customer mix of behaviors. It’s been shown that the largest volume of cards in most programs are hardly used (fewer than 5 times) or are used frequently (51 times or more). This large variance in the customer mix has an impact on program stability and profitability. The goal is to convert a higher percentage of the hardly used to be a more frequent user.
The best-case scenario is when the prepaid card is treated as the customer’s primary financial instrument with their paycheck directly deposited onto it and then using it for everyday necessities such as groceries, gas, and household expenses. In the absence of direct deposit, frequent loads should be encouraged and rewarded.
Research has shown that a significantly large portion of the card base will go dormant for a relatively long period of time before the cardholder uses the card again. In some industry reports for Web GPR programs, almost 20% have a dormancy of 90+ days, which is high considering the average card life is 184 days. Again, staying in touch with your cardholder and having useful features with meaningful offers is the key toward eliminating dormancy.