All purpose prepaid MasterCard 'cashplus' has had over half a billion pounds loaded on it by over 500,000 cardholders. Launched five years ago this month by now profit turning Advanced Payment Solutions (APS), the card's success has defied critics who said there was no place for prepaid in a supposed 'free banking' market.
APS posted nearly £8 million in revenue for the year ending March 2010 and hit profitability earlier this year. The Company is now recouping its considerable start up investment costs and is well on target to hit £12million in revenue for this financial year thanks to a bold strategic plan which included becoming the UK's first non banking E-Money Issuer (ELMI) with a direct membership to issue MasterCard branded cards.
APS Founder and Chief Executive Rich Wagner says:
“The recession helped drive consumer growth because banks are finding it harder to conceal charges and have restricted access to credit. There's a whole market of people who were granted overdrafts and credit cards that they can't pay back at this moment in time. A straight forward product like cashplus lets them function from day to day while they sort themselves out.”
A prepaid MasterCard can be used simply as a payment card, but its range of features makes it possible for use as an alternative bank account, travel card, disbursements card, migrant workers card or money transfer card. Cashplus' broad product features mean it's become the dominant consumer UK prepaid brand even among the brand titans of Virgin, O2 and Paypal which have also entered the market.
Founding CEO Rich Wagner has over 20 years of experience in the payment card industry. Rather than focus on a niche market proposition, the ex Barclaycard executive was ambitious about the need to create a broad all purpose product which could be easy scaled up. Most competitors attempted to launch niche brand-led products and have since exited the sector.
Rich Wagner comments:
“You need to know the payment sector intimately. Because the profit per customer is narrower than most financial products, it's a volume based game. You need a lot of customers who like and, most importantly, use the product. To do that you need to come up with a breadth of product features that can attract a wide selection of customers.”
“You have to observe how your customers use the card and there is a lot of variance. Some use cashplus as a 'piggy bank' for rainy day spending, others use it for online shopping, some use it for all of their bill payments, others to send their kids off on gap year, others again for benefits payments. Stripped back to the core, it's simply an 'enabler' and can be whatever you want it to be whether you are a stay at home mum or an operations manager with a ground crew of 2000 workers needing disbursements. That is why we have been successful.”
Along the way APS has executed some bold strategies which have fast tracked its growth.
Partnering with The Money Shop in 2006 to produce their own brand Titanium cashplus card added significant numbers to customer growth. The 300 store cheque cashing shop gave APS a good volume of new customers with high card loads month on month, which proved to be critical to achieving profitability.
In 2007 Wagner took the decision to part ways with his initial bank sponsor, Siemens Financial, as a prelude to achieving APS' ELMI status. He set up APS Financial, a FSA regulated entity, to give him greater commercial and creative freedom. Previously APS not only needed to share revenue with its bank sponsor but it also needed to fit within the bank sponsor's own strategy, which many times did not align to APS' own.
The latest winning move was a new add-on product called creditbuilder which accounts for 25% of all new customer growth. The free product works in the same way missing a credit card payment does. While missing a payment creates a negative impression on your credit history, if you simply make monthly service payments on your prepaid card it creates a positive impression. In the first year new to credit creditbuilder customers improved their ratings by up to 40%; those with previously poor credit histories increased theirs by up to 15%. The product simply has a different set of terms and conditions on one of the pricing models so that the customer effectively agrees to pay a year long card contract, rather than month by month, which satisfies the credit rating agency criteria – even if it is only for £60 a year.
Commenting on where to next for APS, Rich Wagner says:
“We've proven ourselves as a trusted financial platform. I'm now looking to serve the SME and the larger corporate market where cash and expense management for the client is a current top priority. Cheques are going to be eliminated at some point and there needs to be more effective administrative solutions for distributing money. There's no credit check for SMEs to set up an account so it's easy for us to issue business prepaid cards where payments can be made on the MasterCard main network or through our own Bill Pay platform. Not having to go through a slow and painful process with the company's own banking partner is a huge benefit.”
“There's something very straightforward about prepaid because of its risk cap and transparency which works really well in a big business or public sector environment. It can solve a whole lot of operational business problems for those companies who have better things to focus on than payment logistics. We are ready for big outsourcing deals and could easily double our customer base on our existing platform.”
With almost 600,000 cards issued and over £750,000,000 in payment turnover, APS is one of the world's most innovative payment solutions companies and the most awarded prepaid card provider in Europe. The company's flagship product, the award-winning Cashplus prepaid Gold MasterCard, is the UK's first and best known general purpose prepaid card for consumers.
Small-to-medium sized businesses (SME) and government bodies alike are also now enjoying the benefits of APS' flexible payment solutions, with nearly 3,000 companies and a range of local councils now using Cashplus cards to streamline their payments, manage expenses and take control of their day-to-day banking.