Charles Davis talks to Ralph Bianco, senior
vice-president and head of prepaid cards at US Bank, the
sixth-largest retail banking player in the US. The bank recently
issued its 20-millionth gift card and is studying more efficient
distribution channels such as ATMs as it looks to dominate the US
market.
When other US banks were just beginning to dip their toes in the
prepaid card market, US Bank was developing a comprehensive
distribution strategy aimed at each of the major issuance sectors
from retail to payroll to benefits. Not content with its head start
in the prepaid market, the bank has kept growing the business into
a payments force that now represents one of the fastest-growing
pieces of its retail banking business.
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US Bank recently issued its 20-millionth gift card, solidifying its
place as the top Visa gift card issuer and a leader in prepaid
cards across every segment of the US market. US Bank reached the
10-millionth gift card milestone in July 2006, doubling its
programme in just over a year and then doubling again a year
later.
“We see similar growth in several different places in the prepaid
card market for the foreseeable future,” said Ralph Bianco, senior
vice-president and head of US Bank’s prepaid cards programme. “It’s
an incredibly popular product and by getting an early start and
really committing to it, we have built a comprehensive programme
that we can expand from.”
Follow the customers
Bianco said the key to US Bank’s gift cards strategy is to follow
the customers wherever they go. The bank’s gift cards are available
throughout the US thanks to a series of distribution agreements
with shopping malls, at all 2,512 US Bank branches or online. Its
major partner in the retailing market, Simon Property Group, an
Indianapolis-based operator of shopping malls, owns or has an
interest in 378 properties amounting to 257 million square feet of
gross leasable area in North America, Europe and Asia.
In November, Simon Property won a ruling in its favour from the US
Court of Appeals for the Second Circuit, which ruled that the
National Bank Act pre-empts state laws prohibiting expiration dates
on gift cards issued by national banks. Simon markets cards issued
by US Bank and Meta Financial Group on the Visa network. It used to
market gift cards issued by Bank of America.
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By GlobalData“Early on, we decided that we would implement gift cards by
building a network of malls, where the cards can be marketed
throughout the facility,” Bianco said. “That has been incredibly
important to us.”
US Bank has also continued to add enhancements to its Visa gift
card product line. Customers who purchase cards online now have a
choice of five gift card designs. The gift cards are also displayed
and available for purchase in the branch, with an aggressive branch
marketing effort aimed at increasing sales during the upcoming
holiday season.
Gift cards tend to enjoy seasonal spikes around the spring and
summer, around graduation and Father’s Day (‘dads and grads’), in
autumn when children go back to school and around the Christmas
holiday season. Gift card sales are a factor of convenience, Bianco
said, noting that the key is to make the product easily accessible
through a variety of sales channels, from the malls to US Bank
branches. The cards move very well in a variety of settings,
provided that the marketing effort is prominent and tied to a
variety of seasonal opportunities.
Prepaid cards have become an important area of business for US
Bank. In addition to gift cards, US Bank issues prepaid cards for
payroll, general-purpose spending and rebates. Bianco said that the
bank is “barely scratching the surface” in payroll cards and
predicted significant growth in the future as the bank begins to
expand its efforts aimed at small business payroll issuance.
“There are so many employees who have moved to direct deposit, but
we still see a huge number of unbanked customers with payroll
cheques, and by offering them a payroll card, we can give them an
instant gateway to card-based payments,” he said. “It’s an area we
are really excited about.”
US Bank is also a leader in the use of prepaid cards for
state-sponsored disbursements such as for unemployment insurance,
child support, child care and temporary assistance for needy
families. It was one of the first to partner with states for these
types of payments and continues to be a leader in the industry in
the use of prepaid cards as an alternative to cash and
cheques.
The prepaid card business is the fastest-growing segment of US
Bank’s impressive payment services unit, which includes credit and
debit cards, ATMs and currency conversion services, and a payment
processing business that includes its Nova subsidiary.
Profit margins
At a time when rising interest rates and intense competition are
hurting profit margins on loans, fee-based services such as payment
processing offer US Bank a stable and lucrative source of income.
Its payment clients include the Pentagon, the US Postal Service and
other government agencies, universities, small businesses and
casinos. The company is aggressively expanding into Europe, a
fragmented market where consumers are increasingly shifting to
debit and credit cards.
The bank is showing no signs of slowing its payments business
either. It recently embarked on a mobile payments pilot through its
Elan Financial Services payments unit, partnering with Sapphire
Mobile Systems to enable Elan PayCard customers to access their
accounts via the vendor’s Phire Mobile Debit Network.
The bank is also a pioneer in kiosk technology and Bianco said his
unit is experimenting with prepaid card issuance through ATMs, a
potential killer application that would allow the bank to become
the first issuer to offer remote self-service distribution of gift
cards.
“We’re intrigued by the possibilities,” Bianco said. “We want to be
able to get gift cards in front of the customer in whatever
distribution channel they want to use.”
