In Prepaid, What You Don’t Know Can Hurt You
Too often, we see in the industry prepaid programs being run like credit and debit programs and using legacy technology that was built for debit and credit products and adapted for prepaid. If we’ve said it once, we have said it a million times – prepaid is unique and requires different approaches to program management. It also takes considerable time, attention & expertise to perform prepaid program management. What you don’t know about prepaid program management can come back to hurt you later.
That’s why we are kicking off a new blog series about prepaid program management which will outline some of the new techniques that will help prepaid programs achieve the success of the same magnitude as credit and debit products.
What Does Prepaid Program Management Entail Anyway?
For the first post, I want to review a few program management fundamentals. At a high level, prepaid program management encompasses these 10 components:
- Strategy development
- Brand management
- Data analysis and benchmarking
- Engagement and retention
- Fraud and risk management
- Sourcing and vendor relationships
- Project management
Many of these components are interconnected and so a change to one can impact another, or even the overall program itself. That’s why it’s important to maintain a holistic view of the entire program management function.
To manage all these components, start with determining what the overall program strategy is. This goes back to a topic we blogged about a couple of months ago on consumer value proposition. A crystal clear understanding of your program strategy and solid value propositions are critical steps and will aid you in defining a strong project management process to support its implementation. For even more detail on getting started and developing a strong consumer value proposition, watch the replay of the webinar Building a Strong Foundation in Prepaid.
Next, you will want to build out the operations support, fraud & risk management processes. Make sure you understand and adhere to all compliance-related rules and regulations. These are the basics of program management. Get them wrong and you will pay a heavy price but they are the ante to play in the prepaid market. Once that is all worked out, it’s time to focus on your acquisition strategy, engagement & retention tactics, brand awareness, and data analysis & benchmarking methods. These components deal with how you will attract, enroll, and retain customers.
Obviously, there is a lot involved in all of these steps and as you look through the list of program management components, you will notice that they are quite broad and require wide-ranging expertise. Because of this, you may want to perform some functions yourself and outsource others, as it may actually be less expensive to outsource certain parts to vendors who specialize in specific functions. In the end, if it is not a current strength of your organization, or if considerable new resources, processes, or technology are going to be needed, outsourcing may be the way to go. Attempting to do it all yourself could not only cost you more but delay our program launch. After all, time is money!
Program Management’s Ultimate Goal: Profitability
Ultimately your program management strategy needs to manage both profitable and unprofitable behaviors in the prepaid program. What do unprofitable and profitable prepaid customers actually look like, you ask? Consider this:
Long dormancy periodsFew ATM withdrawals
|Unprofitable Prepaid Customer||Profitable Prepaid Customer|
|Doesn’t activate card when received||Activates card upon receipt|
|Loads once or rarely||Direct Deposit or regular loads per month|
|Pulls all funds out at ATM||Frequent use throughout the month|
|Uses card fewer than 5 times per month||Uses the card for everyday necessities – gas, groceries, bills.|
|Calls Customer Service||Does not call Customer Service – uses mobile|
Effective program management can put your program on the path to profitability by maximizing profitable behaviors & customers while minimizing unprofitable ones. As I mentioned at the start of this blog, if prepaid programs want to achieve the same level of success as credit or debit programs, a new and different approach to program management is needed. We call it the New Approach to Managing Prepaid Programs.
So what is the New Approach all about? It involves four key methods that, when utilized in conjunction with each other, give program managers significant insight into which strategies, campaigns, and tactics have the greatest positive effect on program profitability. We will explore each of these in detail in our future posts, so stay tuned!