Oklahoma-based Central National Bank (CNB) drives ATMs and issues and processes prepaid cards on its own behalf as well as for other financial institutions. A few years ago, the bank identified a golden opportunity to hook its prepaid card system and an array of other self-service transaction services into the switch using Postilion’s integrated solution for self-service banking and payment processing. That foresight not only enabled CNB to win customers, but it also allowed it to tap markets its competitors have yet to penetrate.
CNB has been running its ATMs on the Postilion switch for about seven years, and the prepaid cards program has been operational on the platform since the end of 2006. CNB offers about eight special card programs to its customers, as well as a standard program to other financial institutions on a revenue share basis. This capability also was instrumental in allowing CNB to win a relationship with Home Depot whereby the bank issues and processes prepaid cards for the retailer. And it enabled CNB, in partnership with point-of-sale acquirer Heartland Payments Systems, to break into the university sector by offering a combination prepaid and student ID card.
With the combination prepaid and ID card, students can load the card with cash as well as student and government loans or grants through the university’s bursar’s office. Alternatively, parents can transfer money from their account or credit card to the prepaid card via the Internet.
CNB conducted its first university pilot at Slippery Rock University in western Pennsylvania from August 2007 through January 2008. A second university signed on in April 2008, and around 20 more are expected to enroll in the program during summer 2008.
Now the bank is focusing on delivering remittances via prepaid cards. Brud Baker, president of CNB, believes that by leveraging prepaid cards and switching technology, CNB can substantially lower the cost of remittances, which is especially beneficial for financially underserved consumers – i.e., those who do not have bank accounts. In particular, immigrants who need to send money to their families at home often struggle to afford the fees associated with the traditional routes for transferring funds.
“It’s very expensive for them. They get a check. They pay 2 percent to cash it. Then they go pay Western Union $15 to send money home, and they’re $50 in the hole at that point,” says Baker. “We could do it for $5 or $6.”
CNB has a direct connect with BTS, BBVA Bancomer’s wholesaler in the United States, which enables the bank to provide service in 20 Latin American countries, China and the Philippines. It recently signed a contract with Fonkoze, a microfinance institution in Haiti. In addition, it plans to hook up with a Brazilian bank via the Postilion switch.
Financially underserved consumers are important to the growth strategies of many of CNB’s institutional customers. Being able to make remittances via prepaid cards meets the daily lifestyle needs of consumers in this market segment. Best of all, financial institutions can capture this business without having to incur the expense of luring them away from competitors. Meanwhile, CNB can offer cardholder data to its financial institutions, which can then choose which customers they want to target as potential customers.
According to Baker, the biggest challenge lies in figuring out how the prepaid product will evolve. Currently, it is like having a “checkless” checking account with an added remittance feature. Going forward, there is the possibility to attach credit facilities so the financially underserved can develop credit scores and become more established in society. A savings capability also can be added.
CNB’s goal is to establish a fully integrated, comprehensive self-service transaction platform. It expects to add mobile, voice and business and retail Internet banking to the Postilion platform the next few months. All of these capabilities will run off one backbone, so it is relatively simple and inexpensive to maintain. It also is reliable and robust, so CNB can handle 2 million prepaid card transactions per minute on its existing servers.
Postilion’s reliance on Microsoft technology is another advantage. The solution is easy-to-use, and it integrates well with other systems. “It’s something that’s accepted by the world, so it’s hugely advantageous to us because the learning curve is so much less,” says Baker.
Baron Unbehagen, executive vice president of marketing and alliances for Postilion Americas, agrees. From a vendor perspective, the benefits Baker mentions are some of the driving factors for choosing Microsoft as a base platform. He also points out that the Windows SQL server stack is mature and suitable for meeting financial institutions’ needs.
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www.postilion.com
By Sherree DeCovny