By David ParkerAll new, growing and evolving industries adopt new language and jargon to describe new products, technologies and services. The prepaid card industry is no different. A recent addition to the prepaid lexicon is the term "hybrid prepaid."
Although there is no definitive agreement on what constitutes a hybrid prepaid card, for the purposes of this article we will consider hybrid prepaid to be a prepaid card that also offers users some form of credit, or line of credit, they can access through the card.
Hybrid prepaid cards come in two key types: a "credit builder" and one that offers a line of credit. A slight variation on these types is the card with "multipurse" wallet functionality – the ability to have more than one account or "purse" on the card.
The aim of credit builders is to help customers improve credit histories. Three different business models have developed for this type of card:
The UltraVX Visa Card is an example of this hybrid type.
The hybrid card is a new product, and there will be hurdles. One has already occurred with the iAdvance loan program managed by MetaBank, which helped users secure short-term loans for unexpected expenses. In October 2010, the Office of Thrift Supervision, a U.S. federal bank regulator, ordered MetaBank to discontinue iAdvance, which was offered to consumers via NetSpend Holdings Inc.'s prepaid cards.
The OTS said MetaBank engaged in "unfair or deceptive acts or practices in connection with its operation of the iAdvance program."
In the European Union, legal issues must be addressed as well. But that being said, hybrid cards offer the international prepaid card industry what it is known for – innovation and opportunity.
David Parker is the Chief Executive Officer at U.K.-based consulting and research firm Polymath Consulting Ltd. He can be reached at firstname.lastname@example.org.
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