Digital Transactions Authoritative, insightful and timely information for payments professionals
Prepaid provider InComm Holdings Inc. and smart card maker Gemalto NV have devised a new service that enables mobile-wallet providers and merchants to offer and accept prepaid cards loaded onto near-field communication (NFC)-equipped smart phones.
The InComm Mobile Platform uses Gemalto’s technology—namely its Trusted Service Hub for the interconnectivity, data preparation, and security measures necessary to activate the service for a user, Amol Deshmukh, Gemalto director of solutions sales, tells Digital Transactions News via email.
“Because both Millennials and underserved populations are trending more toward being unbanked or underbanked (in fact, 2013 data from the FDIC showed a combined 27.7% of U.S. households already fit into one of those two categories), there is a significant catalyst for payment providers to revisit the way they handle financial services tailored to those evolving, emerging segments,” Deshmukh says.
Important, too, is that 57% of underbanked U.S. consumers have smart phones. “Given the historical reality that many of those unbanked and underbanked users or households also prefer prepaid cards, InComm and Gemalto found it to be a logical progression to innovate a way to convert prepaid funds into contactless NFC payments that can be used just as easily as a mobile payment funded by any other source,” he says.
The service should benefit consumers, wallet providers, financial institutions, and retailers, Deshmukh says. Consumers will be able to transfer prepaid funds and gifts to a digital form, allowing for contactless payments. Wallet providers and financial institutions get a quick and secure method to digitize payments for a range of NFC devices instead of figuring out how to deploy to multiple mobile carriers and devices. Retailers benefit from being able to accept prepaid funds via another payment channel, he says.
This could be a smart move for the companies, especially if mobile payments continue to grow.
“Now that Google and Apple have set the stage for NFC being the dominant form factor for mobile payments, it seems that other payments providers will follow suit,” Ben Jackson, director of the prepaid advisory service at Mercator Advisory Group Inc., tells Digital Transactions News via email. “We are still in the early stages of mobile payments, but prepaid providers need to start planning now, especially if contactless terminals become widespread in the United States after retailers upgrade their terminals for EMV.”
Retailers are being urged to upgrade to EMV credit and debit card acceptance by Oct. 1 to avoid incurring the liability for transactions made with counterfeit cards. Many EMV-equipped point-of-sale terminals also have NFC capability.
The InComm Mobile Platform works only with SIM cards as the secure storage element, Deshmukh says, though Gemalto’s service also is compatible with host card emulation NFC, which uses software to mimic the secure element.
The InComm Mobile Platform will be marketed to financial institutions, third-party wallet providers, and retailers, Deshmukh says. “Store-branded prepaid and gift cards are a significant way for retailers to keep revenue inside their business ecosystem, so digitizing those accounts makes sense in terms of eliminating the need to handle additional cards, increasing convenience for consumers, and encouraging them to actually spend their prepaid funds,” he says.
What will be interesting is how these three customer groups will use the service, especially as mobile devices, and not just mobile payments, grow in number.
“The service is not needed today,” Jackson says, “but as mobile devices become more of a central organizing point for people’s lives, including their finances, having mobile payments in place will help providers stay relevant.”
