How to Become a Prepaid Card Issuer
A prepaid card is a popular alternative to credit and debit cards, providing customer convenience and satisfaction. Becoming a prepaid card issuer can be a lucrative business opportunity and requires the following steps:
- Research: Become familiar with the regulations of the card issuing industry, including the Electronic Fund Transfer Act (EFTA), Gramm-Leach-Bliley Act (GLBA), Bank Secrecy Act (BSA), and Truth in Lending Act (TILA).
- Obtain approval: Apply for approval from the Financial Crimes Enforcement Network (FinCEN) to become a money services business (MSB).
- Develop bank partnerships: Identify and partner with several banks to obtain a sponsoring depository institution (SDI). An SDI provides overall backing for the prepaid card’s funds.
- Apply for a card issuer: Submit an application to a card network, such as Visa or MasterCard, to become a prepaid card issuer.
Develop Card Program
- Gather funds: Develop a resources raise and liquidity plan to deposit and manage sufficient funds in multiple bank accounts.
- Contract vendor: Seek out and contract a card vendor to provide and manage prepaid cards, including the printing and mailing of cards.
- Start a prepaid card program: Utilize the card issuer’s program as a platform to launch a prepaid card program.
- Market cards: Obtain a business tax identifier number to market prepaid cards through merchant networks or through direct customers.
Manage and Grow Program
- Manage customer accounts: Develop processes to enroll customers and manage their accounts, as well as handle customer disputes and provide customer service.
- Perform Know Your Customer (KYC): Establish KYC guidelines to combat money laundering and fraud. KYC procedures require prospective customers to submit identity documents as part of the account enrollment process.
- Grow marketplace use: Work with customers, vendors, and distribution networks to expand merchant acceptance, limit merchant fraud, and increase card acceptance.
Becoming a prepaid card issuer requires effort and research into regulations and the card issuing industry. However, for those who wish to break into the industry, becoming a prepaid card issuer brings numerous opportunities and potential for growth.