Why Customer Segmentation Matters In Prepaid

Prepaid products have struggled to find their footing in many markets, in spite of the rapid growth reported in the segment. One reason is a “one size fits all” approach to prepaid program development. i2c General Manager Scott Salmon tells PYMNTS how data can help not only find but also engage those customers in meaningful and profitable ways.

Last month, you did a presentation in Dubai addressing the 5 ways to profitability in the prepaid business. Can you elaborate a bit more on the 5 things needed to ensure profitability in the prepaid business how these would potentially differ in developed and emerging economies?

SS: I think the basics are the same, whether it’s an emerging economy or developed economy, and that is figuring how out to develop a value proposition for prepaid and manage that program to provide the best value to the end cardholders, while maximizing the performance of the program from the banks’ perspective. And at the basic level, we find that there are five key tactics for making that happen

The first is that it’s very important to define a value proposition for a prepaid card that allows a cardholder to do what they’re doing today, better. The second is being information-based – that’s critical in terms of understanding how your program is performing and how engaged the cardholders are, and how can you improve that engagement. The third is recognizing the program lifecycle, including the launch and growth phases, and applying different strategies along those stages. The fourth is segmenting the base – there are other performing customers, average performing customers, and high-performing customers – and deploying tactics to increase engagement, understanding why certain customers are the best performing ones. The fifth is engaging with them in an intelligent way – using things like a campaign management platform at i2c to continue to improve the value and help cardholders realize that value.

Earlier this year, one of the largest banks in the US Chase & Co. announced plans to sell l or exit its prepaid card business. Many large financial institutions in the US have challenges with the complexity of the prepaid business. Is there something wrong with the prepaid model in the US? How would you fix it?

SS: I don’t think there’s something wrong. What you see with prepaid at the most fundamental level is that because it’s pre-funded, the risk and the cost dynamics of prepaid cards allow banks and other organizations to target a lot of different types of people and opportunities that they can’t necessarily target with credit and debit products alone. Different organizations find that they have different business propositions for prepaid, and some modify that over time. What we’ve seen with Chase is just that. I don’t think it shows a problem with the prepaid model in the U.S.

You have recently joined I2C to lead the company’s growth in Asia Pacific, Central Europe, Middle East and Africa. Given your past experience as head of global prepaid products at Visa, how mature is the prepaid business in these markets? 

SS: The prepaid market is certainly not as mature in these markets as it is in the U.S., that’s clear. There are some markets where it’s really advanced like in Australia and in India, and others as well. But what you find is that the markets here are clearly in an emerging state of prepaid. What’s interesting is in the APCEMEA, we’re seeing tremendous growth in prepaid categories like travel, online spending, mobile and mobile payment, corporate, commission payments, and government disbursement.

We’re seeing active engagement not only by banks but also by non-bank organizations like retailers and government organizations. The reason is that they’re seeing the value proposition of prepaid cards as distinct from debit and credit.

Emerging markets needs are very different from the needs of developed markets. How is i2c prepared to meet these needs, how are you innovating in these regions?

SS: I think what you see with i2c is that we have a flexible platform that’s modular-driven. That’s important because it allows organizations like banks, retailers, airlines, travel agents, and more to customize solutions for cardholders. That increases engagement, the value of that card to the end cardholder, and allows the banks or retailers to optimize the business proposition for prepaid.

The other important thing is that i2c has very efficient operational support. We can actually launch programs in 30-45 days. That’s important because these markets are evolving quickly, and we think the combination of the technology platform and operational support are key in supporting market needs.

Scott Salmon
General Manager, International, i2c

Scott has over 25 years of experience in strategic planning, product development and product management for some of the world’s leading financial services companies. Prior to i2c, he was Head of Prepaid Products, Asia Pacific, Central Europe, Middle East and Africa at Visa, where he spent 20 years of his career in various strategy and product roles. Before Visa, Mr. Salmon was engaged in a variety of consulting and product management roles in the retail banking sector. As i2c’s General Manager, International, Scott is responsible for developing i2c’s business in key global markets.