(November 14, 2006) The links between the growing payment sectors of prepaid cards and online banking just got a little tighter with the creation by Online Resources Corp. of a new service that lets consumers buy private-label gift cards through their financial institutions’ online banking and bill-payment sites.

The service, called CardHQ, currently lets consumers order cards from or create virtual prepaid card accounts with 10 merchants that include Marriott International Inc., J. C. Penney Co., Starbucks Corp., Best Buy Co., SpaWish Inc., and several restaurant and clothing merchants that Online Resources, a Chantilly, Va.-based online banking and payment operations provider, wouldn’t identify yet. After testing CardHQ late this summer with a handful of banks and credit unions, about 100 of Online Resources' financial-institution online banking and bill-pay clients have signed up for the service, according to a spokesperson.

Online Resources sees CardHQ as a way for its financial institutions and itself to generate new fee income while providing consumers with an easy way to shop for gift cards. “There's a lot of demand [among banks]," says Matthew P. Lawlor, chairman and chief executive of Online Resources. "Financial institutions are looking to mine the [online] channel." Indeed, the strong reponse to CardHQ surprised the company, Lawlor says. "We went out looking for 10 banks to do a pilot," he says.

A consumer gets onto the CardHQ site after clicking on a link or advertisement on her bank-branded Web-banking or bill-pay site supported by Online Resources. From there, she chooses the particular card and dollar amount to be loaded, and enters shipping data and instructions for a personal note to the recipient, if desired. Then the order is processed, with the purchase amount debited in real time from her checking account via Online Resources’ proprietary payments gateway, according to the spokesperson.

Other than paying for shipping fees of approximately $2, consumers get the Card HQ service free and the gift cards carry no expiration date. Financial-institution participants get a commission for selling the cards that ranges from 5% to 12% of the value loaded, the spokesperson says. ORCC makes its money by getting an unspecified share of that commission.

CardHQ merchants currently are selling only closed-loop (private-label) cards because of the low costs: they don’t have to pay interchange as they would with so-called open-loop—Visa- or MasterCard branded—prepaid cards. In addition, Online Resources needs to resolve some regulatory issues before it can add an open-loop option. Nonetheless, open-loop cards as well as adding reloadability and balance-tracking capabilities are among the new features Online Resources is considering for next year. “There are all kinds of things we have planned for CardHQ in 2007,” the spokesperson says.

As prepaid cards and electronic bill payment continue to gain traction with consumers, payment-industry firms are finding new ways to link them. Milwaukee-based processor Metavante Corp., for instance, recently began a service that lets consumers pay bills electronically with payroll cards (Digital Transactions News, Nov. 10). On Tuesday, Metavante also added bill-payment capability through credit and debit cards in a deal it struck with online-banking provider Yodlee Inc.