Prepaid Eyes the Potential in Consumer Rebates And Incentives

In a move that could give the market for network-branded prepaid cards a big boost, Parago Inc. has launched a campaign to move its clients from checks to one-time-use cards for rebates and cash incentives. The Dallas-based company, which manages consumer rebate and rewards programs for corporations, hopes to have half of its clients using prepaid plastic by this time next year, says Juli Spottiswood, a co-founder of Parago who recently took over as its president and chief executive. “It's a compelling value proposition,” she says. Spottiswood will not discuss the privately held company's current client base other than to say the company manages campaign design and back-end rewards fulfillment for “some of the country's largest retailers.” Of all companies issuing consumer rebates to support marketing efforts, she says, about 95% still use paper checks. “There is some education involved that we've been doing the last few months,” she notes. But the market could be significant: Parago's research indicates that U.S. companies issued 250 million rebate checks last year worth $5 billion. The chief advantage to the merchant in using a card, Spottiswood says, lies in its ability to carry branding and marketing messages, something checks can't do. Also, she argues, merchants can expect consumers who receive a prepaid card to spend more at the merchant's stores than they have value stored on the card. There are not measureable cost advantages over printing and mailing checks, however. “You should expect it to be neutral,” Spottiswood says. The cards she is pushing for rebates and cash rewards are branded by one of the national networks?Visa USA, MasterCard Worldwide, American Express Co., or Discover Financial Services LLC?and are intended to function like gift cards. In other words, they're not reloadable, since they're intended to replace checks. Consumers prefer prepaid cards carrying a network brand, Spottiswood says, pointing to survey research in which 88% of consumers opted for a network-branded card, compared with 2% who preferred a merchant-branded plastic. Spottiswood reports some progress so far. “There's definitely receptivity to it,” she says. “They want to understand what this means to their customers.” But though some companies began shifting to cards about four years ago, the movement away from checks has been slow. “It's going to take a few large rebate clients [to make the shift] and then there'll be a domino effect,” she says.