Everyone is getting into the prepaid debit card business. It isn’t just for banks any more. Tax exempt companies, major organizations, and even freelancer hubs like Fiverr are all offering people prepaid debit cards. Money is placed into an account, is released through an ATM request or PIN purchase, and it works wherever the branded credit card processor is accepted. In return, card holders can set up direct deposits, recurring payments, and other common debit card needs.
To start a prepaid debit card business, it helps to already have a business that has been established. The institutions that issue prepaid debit cards like to work with established businesses that have already performed their due diligence and have an established proof of concept that works. If you need to start a business first, then choose one from an industry that you are passionate about before proceeding to issue prepaid debit cards.
If you are established, then you’re ready to follow these additional steps.
1. Choose your preferred debit card processor.
Most debit cards today are issued by Visa. It’s the most widely established credit card processor in the world, but there are other options from which to choose as well. MasterCard and American Express are the two international names that offer debit cards. Local banks and credit unions might have their own branded cards that they will sponsor for you as well.
2. Choose the design of your debit card.
Most debit cards are pretty basic in design. The PayPal debit card, for example, has the business logo on the front of it and a gray background. That’s it. Others have thunderstorms, kittens, or are setup so that individualized designs can be printed on demand. Whatever the design happens to be, just make sure that the color and branding are consistent with the rest of the messages your company is sending out to others.
3. Determine your fee structure.
You’re going to be making money from this business venture based on the fees that you charge. Since 2010, many laws regarding the fees that can be charged and how much is legally allowed have been changed, so take time to research what is allowed and what is not allowed. Prepaid debit cards that are heavy on fees won’t make much money because people will migrate to lower fee cards whenever possible.
4. Choose a smart method of marketing.
NetSpend looked to make a big splash in the prepaid debit card world. To gain the attention of potential customers, they printed out numerous real cards with customer names on them already. The idea was simple: encourage people to use the card by offering them an unsolicited empty card in the first place. Many recipients were upset by the program, however, and the fallout was a public relations nightmare. Your prepaid debit card business should only be promoted in conjunction with your current business. This way everyone who wants the card will be able to receive one.
5. Consider a private label relationship.
Sometimes running a solitary prepaid debit card business is just too time intensive and expensive. For that reason, there are private label prepaid debit card partnerships that can be developed which can save a lot of money on the startup costs. It’s a co-op venture, so your business logo will be the primary card branding, while the program sponsor will receive a place on the card as well. The benefit of this relationship is that there aren’t monthly management fees, monthly minimum requirements to meet, or any long term commitments.
6. Do you want revenue sharing or interchange revenue?
Revenue sharing very rarely occurs with a private label prepaid debit card program. Interchange revenues on purchases are typically the only income source. Custom programs offer revenue sharing on fees and can generate bigger revenues since a program-only debit card for your business could qualify you to receive higher interchange fees as the issuing bank.
7. Make sure that you register your prepaid debit card business as an LLC.
It is very important to manage your financial assets wisely with this type of business. This is especially true since there will likely be at least one other business that you’re managing. By registering this entity as a limited liability corporation, you’ll be able to protect your personal assets in case something unforeseen might happen.
Knowing how to start a prepaid debit card business can be a useful way to expand your revenues. Use these steps to start one today.
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