the compass guide to prepaid - s3.amazonaws.com filemarketing and communications ... reloadable...

© 2012, Center for Financial Services Innovation

The Compass Guide to Prepaid

www.cfsinnovation.com

COMPASS PRINCIPLES: The Compass Guide to Prepaid 2

Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4GPR Prepaid Card Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Background on the Compass Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Creation of the Compass Guide to Prepaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

How to Use the Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Purpose and Audience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Structure of the Compass Guide to Prepaid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Bringing the Practices to Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

The Guide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Compass Practices for Prepaid Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Core Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

1. Product Functionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

2. Marketing and Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

3. Customer Service and Account Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

4 . Pricing Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Stretch Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

5. Product Functionality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

6. Marketing and Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

7. Customer Service and Account Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

8. Distribution Channels and Product Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Next Generation Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

9. Additional Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Applying the Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

Table of Contents


CFSI recognizes Romy Parzick, Manager, Innovation and Research, for her leadership and vision for the Compass Guide to Prepaid and the Advisory Council on Prepaid. Her diplomacy, good judgment, and persistence guided this work from the concept phase to successful completion.

CFSI thanks Rob Levy, Manager, Innovation and Research, for his important and thoughtful contributions to the content and structure of the Compass Guide to Prepaid.

And, CFSI greatly appreciates the advice and support provided by the Ford Foundation, Omidyar Network, and the Advisory Council on Prepaid member companies, including:

• AARP Foundation

• American Express Company

• Bancorp Bank

• Comerica Bank

• Consumers Union

• FIS Global

• Green Dot Corporation

• The Leadership Conference on Civil and Human Rights

• MasterCard Worldwide

• MetaBank/Meta Payment Systems

• National Consumer Law Center

• National Urban League

• NetSpend Corporation

• Plastyc

• TxVia

• Visa Inc .

• Walmart

• Western Union

Acknowledgments


GPR Prepaid Card AccountsThe Compass Guide to Prepaid (the Guide) is a tool for improving the quality of general purpose reloadable (GPR) prepaid card accounts by establishing guidelines for their design and delivery. GPR prepaid accounts are open-loop accounts issued by financial institutions. Money can be added repeatedly to a GPR prepaid account. The funds may be accessed at any location that accepts the card’s payment network1 for any type of purchase.

This Guide focuses exclusively on GPR prepaid card accounts. As used in this Guide, “prepaid accounts” refers only to general purpose, open-loop, reloadable prepaid accounts.

At the Center for Financial Services Innovation (CFSI), we believe strongly in the potential for prepaid accounts as a financial tool that can actively contribute to improving people’s lives. Especially for underserved consumers, quality prepaid accounts can provide tremendous value, including:2

• Safety and security: Consumers can make purchases and pay bills without carrying large amounts of cash.

• Convenience: Consumers can make purchases and access funds at many locations and at all hours .

• Accessibility: Prepaid accounts offer many features of conventional card accounts, including network branding and near-universal acceptability.

• Immediate liquidity: Funds directly deposited to a quality prepaid account are available immediately. Many low-income consumers cannot afford to wait for a bank to clear a deposited check .

• Predictability and discipline: Quality prepaid accounts can help consumers limit spending and stay on budget.

• Acceptance and inclusion: Because prepaid cards are a form of plastic, customers have a way to pay that does not differentiate them from more financially advantaged consumers. Unlike money orders, for example, which are visible signs of not having a checking account, prepaid cards act and look like credit or debit cards .

Because they have such important benefits, prepaid accounts are the focus of this first product-specific guide developed as part of the Compass Principles initiative, an effort by CFSI to establish quality standards in financial services.

Overview


Overview

Background on the Compass PrinciplesThe Compass Principles are aspirational guidelines to assure quality innovation and execution in financial services—services that enable people to transact, borrow, save, and plan in ways that are beneficial to the consumer and profitable for industry. The Principles reflect the belief that the U.S. financial services marketplace can actively contribute to improving people’s lives, and deliver sustainable value to all consumers and providers . The four Compass Principles are:

• Embrace Inclusion: Responsibly expand access Consumers, including those from traditionally underserved groups or communities, are creatively reached and well served with a relevant suite of quality, affordable financial services that promote consumer choice and are provided in a safe, dignified, and convenient manner.

• Build Trust: Develop mutually beneficial products that deliver clear and consistent value Consumers can clearly understand and derive value, without pitfalls or unwelcome surprises, from financial products designed to align provider and consumer goals.

• Promote Success: Drive positive consumer behavior through smart design and communication Consumers are empowered to make wise money choices via smart product design and guidance that is relevant to their specific concerns and financial situations, coincides in a timely fashion with key life events or decisions, and is immediately actionable .

• Create Opportunity: Provide options for upward mobility Consumers have appropriate options that create opportunities for increased financial prosperity, and they are encouraged to pursue those opportunities.


Overview

The Compass Guide to Prepaid and the Compass Principles are guided by the following six values:

• Profitability and Scalability: The Compass Principles provide a framework that is pragmatic, achievable, financially sustainable, and scalable.

• Deep Customer Knowledge: The Compass Principles are formulated and must be implemented with a solid understanding of real consumer needs.

• Safety: The Compass Principles support and build upon consumer protections.

• Variation and Choice: The Compass Principles allow for judgment on the part of individual providers, because there is no one right way to meet all customer needs.

• Relationships: The Compass Principles focus on success for both consumers and providers and encourage viewing each customer interaction as an opportunity for a long-term relationship.

• Cross-Sector Participation: The Compass Principles incorporate the perspectives of a range of practitioners and experts.

For additional information on the Compass Principles, please visit: www .compassprinciples .com .


Overview

Creation of the Compass Guide to PrepaidThis Guide was created by CFSI with the input of the Advisory Council on Prepaid (the Council). The Council is a group of leading prepaid industry stakeholders who came together to provide feedback on the Compass Principles and to serve as advisors for the Guide. Council members represent leading prepaid stakeholders in the United States, including program managers, issuing banks, distributors, processors, networks, nonprofits, and consumer advocacy groups. Please see the acknowledgments section for a list of our Council partners who contributed to the Guide, and visit www .compassprinciples .com for examples of Council members and other companies that are bringing the practices in the Guide to life in the marketplace.

We are grateful for the wisdom and guidance of the Advisory Council on Prepaid in this process. However, the Guide does not necessarily reflect the individual views of Council members. CFSI takes full responsibility for the end product, and all comments, suggestions, or criticisms should be directed to CFSI .

How to Use the GuidePURPOSE AND AUDIENCEThe Compass Guide to Prepaid is a tool for improving the quality of prepaid card accounts through guidelines for their design and delivery. Prepaid program managers can use it to review or improve existing offerings, or to design new ones. Other actors in the prepaid supply chain—such as issuing banks, processors, payments networks, distributors, and investors—can use the Guide to inform their own assessment tools for prepaid programs. In particular, issuing banks, processors, and payments networks are further encouraged to use the Guide as they determine which features and functionality to develop and offer to their prepaid partners.

STRUCTURE OF THE COMPASS GUIDE TO PREPAIDThe Guide is divided into two sections:

1 . Compass Practices for Prepaid Accounts

2 . Applying the Compass Practices

The “Compass Practices for Prepaid Accounts” section outlines three categories of practices:

• Core Practices—This section outlines the standards for a high-quality prepaid account. A prepaid account should not be considered high-quality unless it meets the practices listed in this section.

• Stretch Practices—This section provides additional best practice ideas for providers looking to stretch beyond the basic requirements.


Overview

• Next Generation Practices—This section is for providers that have met the standards for quality, challenged themselves to stretch beyond the basics, and are considering additional services for their prepaid account customers. These practices are called “next generation” to emphasize the need for new models that actively contribute to improving people’s lives and deliver sustainable value to all consumers and providers. Many current approaches are not responsible or viable for the consumer or the provider, and we need customer-focused innovation, research, and testing for these new models to emerge.

To promote creativity, the “Applying the Compass Practices” section illustrates how a company might apply the practices. Please note that the examples, even for core practices, are simply for illustrative purposes and should not be used as a checklist. Many examples entail distinct business strategy decisions that are at the provider’s discretion. Many are not immediately operational because a viable business model has not yet emerged, the requisite technology is not fully developed, or regulatory uncertainty demands careful deliberation. Nonetheless, we have included them to anticipate and hasten the day when such models, technologies, and regulatory clarity exist.

In some cases, regulatory constraints may make it more challenging for some providers to offer certain features listed in the Guide. The best example of this is the prepaid account exemption from the interchange cap. For banks with over $10 billion in assets to claim the exemption, they have to meet various criteria including no overdraft and limits on check, ACH, or wire transfer transactions. Therefore, to claim the exemption, these companies can offer cash withdrawal at the ATM or purchases at the point of sale, but not features such as electronic bill payments, linked savings accounts, or money transfers. This provision places additional constraints on these companies, but does not prevent them from offering high-quality prepaid products.

This Guide is not intended to provide advice about regulatory compliance. Users should seek legal counsel to ensure compliance with all applicable laws and regulations.

BRINGING THE PRACTICES TO MARKETThis Guide sets a high bar for prepaid accounts. In seeking competitive advantage through consumer-focused design and innovation, companies will implement these practices in their own ways.

For example, through our Compass Commitments initiative, we are partnering with select prepaid companies that make public commitments to specific, measurable, high-impact initiatives demonstrating application of the Compass Principles. Companies making Compass Commitments will vary widely in their implementation of these practices. There is inherent value in choice, diversity, and continued innovation, and this initiative is not designed to produce uniform products and services. This Guide is about guiding, enabling, and encouraging the right access for consumers and offering new and creative solutions to help them achieve their financial goals.


The Guide

Compass Practices for Prepaid AccountsCORE PRACTICESThis section outlines the standards for a high-quality prepaid account. A prepaid account should not be considered high quality unless it meets these practices. The column to the right of each practice indicates the Compass Principle(s) best exemplified by the practice.

1. Product FunctionalityPractices regarding an account’s transactional features, including the ability to load, store, and access funds.

1 .1 Deposit insurance: Consumer funds are safe and fully insured.Embrace Inclusion, Promote Success

1 .2 Load: Consumers have multiple, convenient options for adding funds to their account.

Embrace Inclusion, Promote Success

1 .3 Pay: Consumers can make purchases from and payments to nearly all merchants, billers, and individuals.


1 .4 Withdraw: Consumers have convenient and immediate access to their funds through many channels.

Embrace Inclusion

2. Marketing and CommunicationsPractices regarding how the consumer learns about the product, its features, and prices.

2 .1 Fee disclosure: Prices are easily accessible and are presented simply and clearly.

Build Trust

2 .2 Account terms disclosure and privacy policy: Consumers are effectively informed of all account terms and any changes in those terms, and their privacy is protected.

Build Trust


3. Customer Service and Account InformationPractices regarding consumers’ ability to access account information, to identify and resolve problems with the account, to make adjustments to their account, and to receive the information and support necessary to use the account successfully.

3.1 Access to balance and transaction history: Consumers have many ways to access their balance information and transaction history quickly.

Build Trust, Promote Success

3 .2 Customer service center: It is easy to obtain customer support, and callers to the customer service center are treated respectfully and helpfully.


3.3 Fraud and error resolution: If fraud, errors, or malfeasance affect a consumer’s account, the consumer’s liability is limited, and appropriate investigative procedures are taken to resolve the problem .

Build Trust

3 .4 Paper statements: Consumers can request mailed paper statements at a reasonable cost and access statements electronically in a printable format.

Build Trust

4 . Pricing DesignPractices regarding the design of prepaid account pricing schedules that balance overall affordability, simplicity, consumer choice, and provider costs.

4.1 Pricing schedule and options: The pricing schedule is simple, straightforward, and supportive of consumer choice.

Build Trust

4 .2 Individual fees: Individual fees are affordable and designed to align profitability for the provider with success for the consumer.


4.3 Building a supportive customer-provider relationship: The pricing schedule encourages a supportive rather than a punitive relationship between customers and providers.

Build Trust

The Guide


STRETCH PRACTICESThis section provides additional best practice ideas for providers looking to stretch beyond the basic requirements. The column to the right of each practice indicates the Compass Principle(s) best exemplified by the practice.

5. Product FunctionalityPractices regarding an account’s transactional features, including the ability to load, store, and access funds.

5.1 Additional customer benefits: Consumers receive additional benefits that increase the account’s value.


6. Marketing and CommunicationsPractices regarding how the consumer learns about the product, its features, and prices.

6.1 Promoting positive customer use: Consumers receive proactive guidance about how to enhance their use of the product .

Build Trust, Promote Success, Create Opportunity

7. Customer Service and Account InformationPractices regarding consumers’ ability to access account information, to identify and resolve problems with the account, to make adjustments to their account, and to receive the information and support necessary to use the account successfully.

7 .1 Alerts: Consumers can set-up customizable alerts for specific situations to help them budget better, avoid fees, and detect fraud quickly.


8. Distribution Channels and Product Acquisition Practices regarding where, when, and how consumers can access, acquire, and register an account.

8 .1 Account access: Registration procedures enable a wide range of consumers to access the product, while balancing increased access with appropriate regulatory requirements.

Embrace Inclusion

8 .2 Reaching the consumer: The product is available through a variety of convenient and familiar locations and channels.

Embrace Inclusion

The Guide


NEXT GENERATION PRACTICESThis section is for providers that have met the standards for quality, challenged themselves to stretch beyond the basics, and are considering additional services for their prepaid account customers. These practices are called “next generation” to emphasize the need for new models that actively contribute to improving people’s lives and deliver sustainable value to all consumers and providers. Many current approaches are not responsible or viable for the consumer or the provider, and we need customer-focused innovation, research, and testing for these new models to emerge .

The column to the right of each practice indicates the Compass Principle(s) best exemplified by the practice.

9. Additional ServicesPractices regarding additional, non-transactional services.

9.1 Budgeting: The prepaid account provides consumers with tools for planning, budgeting, and tracking expenditures.

Promote Success, Create Opportunity

9 .2 Savings: Consumers can easily transfer funds easily into a savings account .

Promote Success, Create Opportunity

9.3 Credit Reporting: The provider explores how the consumer’s transaction history could assist the consumer in applying for credit or building a positive credit report.

Embrace Inclusion, Create Opportunity

9.4 Credit Access and Overdraft Services: When offering credit or overdraft services with prepaid accounts, providers should exercise caution and offer only high-quality, safe, affordable options.

Create Opportunity

9 .5 Other Financial Needs: Consumers can choose to allow providers to use their transaction history as the basis for offering other beneficial products.

Create Opportunity

The Guide


Applying the PracticesThis section illustrates how a company might apply the practices to a prepaid account offering. These examples are intended simply to inspire creative ideas and should not be used as a checklist. Many examples entail business strategy decisions that are at the provider’s discretion. Many could not be implemented immediately for one reason or another. Perhaps no viable business model has emerged, the requisite technology is not fully developed, or the regulatory climate requires caution. In some cases, regulatory constraints may prevent certain providers from implementing some of the examples. Nevertheless, we include them to anticipate and hasten the day when such models, technologies, and regulatory clarity exist.

1 .1 Deposit insurance: Consumer funds are safe and fully insured.

Examples

• Consumer funds are protected through full FDIC or NCUA pass-through insurance.

• The FDIC or NCUA logo is displayed prominently, along with a statement on the provider’s website and the card packaging that consumers’ funds are insured.

1 .2 Load: Consumers have multiple, convenient options for adding funds to their account.

Examples

• Consumers can load cash onto their accounts via a reload network or branch network with multiple locations and a regional or national footprint.

• Direct deposit is promoted as a convenient loading method, and it is easy to sign up (e.g., the provider shows a mock voided check or makes available enrollment forms with routing numbers).

• Consumers can deposit checks on the go via ATMs or mobile remote deposit capture (RDC).

The Guide


1 .3 Pay: Consumers can make purchases from and payments to nearly all merchants, billers, and individuals .

Examples

• The card is network-branded .

• Consumers can make person-to-person payments from their account.

• Consumers can pay bills and receive payment confirmation online, via kiosk, phone, and/or walk-in bill-pay locations.

• Consumers can send paper checks from their prepaid account.

• Consumers can make mobile payments using their prepaid account or by incorporating their prepaid account into a mobile wallet .

• Merchant partners are encouraged to enable and train staff to execute partial payments in order to reduce declines .

• When plastic is not accepted, consumers can access pre-funded checks to make in-person payments.

1 .4 Withdraw: Consumers have convenient and immediate access to their funds through many channels.

Examples

• Consumers can access their cash via a regional or national ATM network, a regional or national branch network, financial services centers, and/or PIN-based POS cash-back.

• Consumers are able to access funds immediately after making loads or deposits.

• Consumers have convenient tools to see the scope of the ATM network before choosing prepaid accounts, and to locate specific ATMs when using their accounts.

The Guide


2 .1 Fee disclosure: Prices are easily accessible and are presented simply and clearly.

Examples

• Simple, clear, and straightforward language is used to describe fees, with no industry jargon or acronyms.

• The format and visual design of the fee disclosure is useful and easily understandable (e.g, organizing information into tables with categories).

• All commonly incurred fees are transparently and prominently displayed inside a fee box, which customers can review before purchase. The fee box is clearly displayed:

- In retail locations: on the outside of the package.

- At bank and other financial services branches: on promotional signs or pamphlets.

- Online: directly accessible via the main product page.

• A complete and comprehensive list of all fees, including those that are seldom incurred, is disclosed in a fee box at the top of the terms and conditions for the card.

• If multiple pricing options are offered (e.g., monthly all inclusive or pay-as-you-go), those options and their respective pricing schedules are clearly identified and easy to compare.

• Fees are clearly identified and summarized prominently in transaction histories.

2 .2 Account terms disclosure and privacy policy: Consumers are effectively informed of all account terms and any changes in those terms, and their privacy is protected.

Examples

• Account term disclosures comply fully with Regulation E as applied to payroll cards.

• Easily accessible FAQs provide detailed information about account usage.

• For mobile users, special care is taken with disclosures to make them easy to access on demand and legible on the small screen .

• Changes to account terms for exiting cardholders are minimized or avoided; effective notice regarding changes is provided at least 90 days in advance.

• After a change in account terms, real-time messaging is used to alert consumers incurring a new or changed fee for the first time.

• The product (including its features, benefits, and costs) are accurately described to the consumer without misleading communications (e.g., promoting the product as a credit card)

• Consumers affirmatively and explicitly opt in for information sharing and the choice to opt in is highlighted and not buried in text .

The Guide


3.1 Access to balance and transaction history: Consumers have many ways to access their balance information and transaction history quickly.

Examples

• Consumers can access account balance and transaction history (including pending transactions) via phone call, online, text message, and/or mobile app.

• Consumers can view at least two years of transaction history electronically to help with long-term budgeting or tax-time account review.

• Account information is clear and easy to understand and available in multiple languages.

3 .2 Customer service center: It is easy to obtain customer support, and callers to the customer service center are treated respectfully and helpfully.

Examples

• Customer service representatives or Interactive Voice Response (IVR) systems communicate in multiple languages.

• IVR systems are easy to navigate and make clear how to access a live agent.

• Customer service representatives are instructed to promote positive customer behavior, to help customers minimize fees while maximizing product use, and to offer leniency for repeated penalty fee charges.3

3.3 Fraud and error resolution: If fraud, errors, or malfeasance affect a consumer’s account, the consumer’s liability is limited, and appropriate investigative procedures are taken to resolve the problem .

Examples

• All consumer liability protections and procedures under Regulation E as applied to payroll cards are provided, namely:

- If a consumer reports a lost/stolen card within 2 business days of learning of the occurrence, the consumer’s liability is limited to $50.

- If a consumer reports an error or unauthorized charge to the account within 60 days of electronically accessing account information, the consumer’s maximum liability is $500.

- If a customer reports an unauthorized transaction, the provider will resolve the dispute or issue a provisional credit within 10 business days.

• Consumers are actively informed and reminded of ways to maintain their accounts securely and to look out for fraudulent activity.

• Consumers have the option to temporarily suspend a missing card.

• Consumers whose card is lost or stolen are offered alternatives for cash replacement.

• The provider’s dispute resolution terms do not mandate arbitration.

The Guide


3 .4 Paper statements: Consumers can request mailed paper statements at a reasonable cost and access statements electronically in a printable format.

Examples

• Consumers can request paper statements in accordance with Regulation E as applied to payroll cards.

• Consumers can request a single paper statement or ongoing paper statements.

• Consumers may choose an annual paper statement.

• Account information is clear and easy to understand and available in multiple languages.

• Consumers can request or print paper statements through various channels, such as via website, ATM, or mobile.

4.1 Pricing schedule and options: The pricing schedule is simple, straightforward, and supportive of consumer choice.

Examples

• The total number of items on the pricing schedule is kept to a minimum.

• Fees are set in easy-to-remember amounts.

• Consumer pricing options (e.g., an all-inclusive option versus a pay-as-you-go model) are designed so that the consumer can easily choose which best fits their preferences and usage.

• The pricing schedule avoids disingenuous labeling of “free” items, such as “free FDIC insurance .”

• If the pricing schedule lists free items, they should only be items that help the consumer use the card better, such as showing free ways to add money to the account.

The Guide


4 .2 Individual fees: Individual fees are affordable and designed to align profitability for the provider with success for the consumer.

Examples

• Individual fees incent positive and consistent consumer usage and behavior (e.g., the monthly fee is reduced or waived for direct deposit sign-up, or the purchase transaction fee is minimized or eliminated to increase usage).

• Information fees are not a core profit driver for providers and are minimized or eliminated to facilitate quick, easy consumer access to account information.

• To encourage cost-effective consumer usage, fees are minimized or eliminated when lower-cost means are used. For example:

- Load fees are minimized or eliminated for direct deposits.

- ATM withdrawal fees are minimized or eliminated for in-network ATMs.

4.3 Building a supportive customer-provider relationship: The pricing schedule encourages a supportive rather than a punitive relationship between customers and providers.

Examples

• The pricing schedule is designed in a comprehensive manner with the full expected consumer cost in mind .

• Penalty fees4 are not a core profit driver for providers, and are minimized or eliminated.

• When penalty fees are incurred, leniency is offered for consumers learning to use the account.

• Customer service fees are eliminated for customers calling to resolve a problem caused by the account.

• Consumers can close their accounts at will and retrieve all remaining funds.

5.1 Additional customer benefits: Consumers receive additional benefits that increase the account’s value .

Examples

• Consumers can order companion cards .

• Loyalty programs, rewards, or merchant-funded discounts are offered.

• Consumers have access to a surcharge-free network of ATMs.

The Guide


6.1 Promoting positive customer use: Consumers receive proactive guidance about how to enhance their use of the product.

Examples

• Customers are encouraged to monitor fees and transactions.

• Fees charged are clearly identified in transaction histories, along with recommendations for lower-cost alternatives (e.g., in-network ATMs).

• Consumers are proactively alerted and informed when lower-cost alternatives are available (e.g., a consumer who overuses ATM balance inquiry may be informed that balance inquiry via text message is free; someone using an out-of-network ATM may be notified of a nearby cheaper alternative).

• Consumers are educated on the various means to make payments and how to minimize associated costs

• If account usage suggests a consumer might benefit from a different pricing option, the consumer is proactively informed.

• Providers communicate the total cost of ownership for accounts by providing tools (such as a fee calculator) that enable consumers to compare fees based on different behaviors.

7 .1 Alerts: Consumers can set-up customizable alerts for specific situations to help them budget better, avoid fees, and detect fraud quickly.

Examples

• Text, email, and phone alerts can be set for specific balance amounts, direct deposit credit, ATM fees, regular or irregular transactions, and so on.

8 .1 Account access: Registration procedures enable a wide range of consumers to access the product, while balancing increased access with appropriate regulatory requirements.

Examples

• Consumers can use multiple forms of identification for account registration (e.g., foreign identification).

• Consumers are not denied accounts for lack of credit history.

• All appropriate Know Your Customer and Customer Identification Program protocols are upheld .

• Enrollment procedures effectively support consumers whose information is not initially accepted for verification purposes.

The Guide


8 .2 Reaching the consumer: The product is available through a variety of convenient and familiar locations and channels.

Examples

• Consumers can acquire the product in person through retail merchants, bank branches, and/or financial services centers.

• Consumers can acquire the product over the phone, online, and/or via mobile channels.

• Nonprofit and public entities (e.g., community organizations, municipalities, transit, etc.) are engaged to introduce the product as an option to their new customers.

• Free trials (with appropriate limits) are offered to increase awareness of product benefits, possibly in partnership with community organizations.

9.1 Budgeting: The prepaid account provides consumers with tools for planning, budgeting, and tracking expenditures .

Examples

• Consumers are offered online or mobile budgeting and personal financial management tools and/or access to third-party providers for those purposes.

• Consumers are offered customizable text message and email alerts tied to specific budgeting goals.

• Consumers’ spending behavior is displayed through visual graphs.

• The account includes tools enabling consumers to compare prices of goods before purchase.

9 .2 Savings: Consumers can easily transfer funds easily into a savings account.

Examples

• Consumers can link their prepaid account to a savings ‘bucket’ or connect the account directly to a traditional bank savings account.

• The account offers incentives to save, such as a meaningful interest rate or other rewards for funds held in the savings account.

• Consumers can set-up automatic transfers to the savings account.

The Guide


9.3 Credit Reporting: The provider explores how the consumer’s transaction history could assist the consumer in applying for credit or building a positive credit report.

Examples

• Consumers can choose to have their transaction data reported to one or more of the major credit bureaus .

• If data is reported to credit bureaus, consumers are informed which credit bureaus are receiving it and how the data is being used .

9.4 Credit Access and Overdraft Services: When offering credit or overdraft services with prepaid accounts, providers should exercise caution and offer only high-quality, safe, affordable options.

Examples5

• Consumers have the option to apply for a high-quality, safe, affordable loan.

• Consumers receive the highest-quality and most affordable loan for which they qualify.

• A small percentage of the loan disbursement is transferred automatically into a consumer’s savings account to reduce future dependence on credit.

• Consumers who chose overdraft services clearly and affirmatively opt-in and are provided with real-time messaging and reasonable grace periods when their account has been overdrawn .

9 .5 Other Financial Needs: Consumers can choose to allow providers to use their transaction history as the basis for offering other beneficial products.

Examples

• Consumers with positive transaction behavior are offered the opportunity to open a checking account (for bank-offered cards) or to apply for competitively priced products such as an auto loan or traditional credit card.

The Guide


1 - Payment networks include American Express,® Discover,® MasterCard,® and Visa.®

2 - For more information regarding consumer benefits of prepaid card accounts, see CFSI’s “A Tool for Getting by or Getting Ahead? Consumers’ Views of Prepaid Cards” at http://cfsinnovation.com/node/330566

3, 4 - In this Guide, penalty fees are defined as fees a consumer pays as a result of an unintentional action, a mistake, or behavior the provider wishes to discourage. Such fees, including card decline and inactivity fees, tend to arise unexpectedly, and consumers often do not take them into account when assessing the total cost of using a prepaid product.

5 - These are just a few examples for this practice, and not meant as comprehensive guidance.

References

Further explanation of what constitutes high-quality, safe, affordable credit services is a critically important matter that requires greater attention and detail than is possible in this prepaid-focused Guide. CFSI will publish separate Compass Principles guidance for small dollar credit .

About CFSI:The Center for Financial Services Innovation (CFSI) is the nation’s leading authority on financial services for underserved consumers. Through insights gained by producing original research; promoting cross sector collaboration; advising organizations and companies by offering specialized consulting services; shaping public policy; and investing in nonprofit organizations and start-ups, CFSI delivers a deeply interconnected suite of services benefiting underserved consumers. Since 2004, CFSI has worked with leaders and innovators in the business, government and nonprofit sectors to transform the financial services landscape. For more on CFSI, go to www.cfsinnovation.com.

The Compass Principles is supported, in part, by:

New York City611 Broadway Suite 510New York, NY 10012

Head OfficeChicago20 N. Clark Suite 1950 Chicago, IL 60602

Washington D.C.1730 Rhode Island Ave NW Suite 912Washington, DC 20036

www.cfsinnovation.com

the compass guide to prepaid - s3.amazonaws.com filemarketing and communications ... reloadable...

Documents