Prepaid Cards Inspire Change

New rules could give gift card packaging a new look, while retailers consider bumping up financial services to complement the prepaid segment.

By Erin Rigik Del Conte, Senior Editor

The prepaid category could be getting a makeover next spring due to new rules by the Consumer Financial Protection Bureau (CFPB) that require, among other things, expanded disclosures on gift card packaging. Meanwhile, convenience store retailers are looking to financial services opportunities to increase their offerings.

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“The convenience of financial services-related products like money transfers and bill pay are a value-add to our guests, particularly as compared to more traditional products, like prepaid (cards),” said Anna Kjerrumgaard, category manager of services for Atlanta-based RaceTrac Petroleum.

Kjerrumgaard oversees new products and offerings entering the prepaid category, and RaceTrac’s financial services programs, including bill pay, money transfer and check to card services, at RaceTrac Petroleum’s more than 700 RaceTrac and RaceWay stores in 12 southern states.

“At RaceTrac, our prepaid and financial services categories are closely related as more prepaid companies are expanding their offerings to include financial services like bill pay,” Kjerrumgaard said.

When it comes to gift cards, RaceTrac is watching the trend toward digital products. In March, the chain fine-tuned and then relaunched the ability to load and reload gift cards through the RaceTrac app. RaceTrac is also revising its business-to-business (B2B) card program. Currently RaceTrac gift cards are available at Publix and Kroger. If companies want to place orders for RaceTrac gift cards, the process used to involve sending a fax for a bulk order.

“As our technology needs increase, we are looking into third parties to manage our B2B and business-to-consumer (B2C) programs,” said Kjerrumgaard. “We’re also updating our website so you can order or request gift cards through a RaceTrac scanned website and then through a third party that will ship either physical cards or digital cards, which we didn’t have the capability to do in the past.”

She expected the prepaid category to be flat or down for the first quarter with the transition to accepting cash only on certain prepaid items, but was optimistic about the remainder of the year.

“We are in the process of rolling out new fixtures to all of our stores and through the update in merchandising and shopability, I expect to end the year strong with those new fixtures,” Kjerrumgaard said.

RaceTrac is moving away from rotating standalone units and is instead moving toward a universal gift card fixture that works well in all RaceTrac store types.

“Where we formerly had four feet of space, we’re moving down to two feet of space, but we’re maintaining our facings,” said Kjerrumgaard. “And, I would say that it’s an improvement in look and shopability. By decreasing our space in about half of our stores, we’ve opened up room for an alternative product offering and we’re still expecting to see a lift on those gift card items.”

The new fixtures will features a range of open loop cards, such as Visa and Mastercard products, as well as closed loop cards for restaurants, stores and telecommunications, as well as RaceTrac gift cards. RaceTrac does not currently offer general purpose reloadable (GPR) cards as it does not currently have the ability to do reloads via swiping the card.

“We really believe that swipe reload is the best way to launch those products. We’re actively looking into it and hoping to add that capability,” she said.

RaceTrac runs two gift card-focused promotions a year with “moms, dads and grads” in May and June and then a holiday promotion in December. “These promotions provide us significant sales lift each year,” Kjerrumgaard said.

Going forward, Kjerrumgaard expects bill pay and other financial services to play a large role in shaping the category.

On June 15, 2017, the Consumer Financial Protection Bureau (CFPB) released proposed revisions to its final Prepaid Accounts Rule that was published in November 2016, and noted implementation has now been delayed until April 1, 2018 (from the original date of October 2017).

The CFPB is seeking comments on proposed revisions. According to the CFPB, “the rule requires financial institutions to limit consumers’ losses when funds are stolen or cards are lost, investigate and resolve errors, give consumers free and easy access to account information and provide protections if credit is offered. The proposal would adjust requirements for resolving errors on unregistered accounts and provide greater flexibility for credit cards linked to digital wallets.”

Convenience stores should expect that prepaid card owners may replace many of the cards in the racks as the implementation date draws near. “Providers will want to make sure that the cards with the latest disclosures and packaging are the only ones for sale,” said Ben Jackson, director of prepaid advisory service at Mercator Advisory Group, a research and advisory services firm focused on the payments industry. Even in the event the rules are overturned,

“There will probably be a gradual replacement of prepaid cards because many have already redesigned their packaging and have begun printing them.”

The prepaid industry continues to seek a delay of one year from the original October 2017 implementation date to October 2018, noted Jackson. “They want more time to update terms and conditions and disclosures and get the old cards off the shelves.”

While CFPB doesn’t require prepaid card companies to remove and replace old cards, Jackson noted contract law would still make it necessary.

“Once the new rules come into effect, if the old cards were still out there, people would be looking at an outdated contract, as far as the terms of the conditions,” said Jackson. “So that would be a big concern.”

Convenience store consumers won’t see a direct cost change due to the rules.

As far as how it impacts c-store operators, Jackson said some providers may decide to make changes to the displays in the store to either indicate places where a shopper could get more disclosures or else include longer disclosures for particular programs. “Nobody has proposed that yet, but it’s one of the things that could happen,” said Jackson.

“This is going to be an evolving situation,” Jackson added. “Retailers should keep their eye on what’s going on. Retailers should make it a point to check in every so often with the distribution companies that do their displays or with prepaid companies that they have close contact with to see what is going on.” Regardless of the CFPB rules, Jackson said, “prepaid will continue to be an important part of the product mix in the future.”