Do you want to start a prepaid credit card company like Visa? If YES, here is a complete guide to starting a prepaid credit card company with NO money and no experience.
Okay, so we have provided you an in-depth sample prepaid credit card company business plan template. We also took it further by analyzing and drafting a sample prepaid credit card company marketing plan backed up by actionable guerrilla marketing ideas for prepaid credit card companies. In this article, we will be considering all the requirements for starting a prepaid credit card company. So put on your entrepreneurial hat and let’s proceed.
Why Start a Prepaid Credit Card Company?
If you live in the United States of America or in any developed country, you will agree that there are opportunities for citizens to access prepaid credit card as long as they have the means of financing the credit card. It is a way of giving leverage to people who don’t have cash at hand but need cash.
Starting a prepaid credit card services business can be demanding and risky at the same time, nevertheless if you have done your due diligence before venturing into the business, you are likely not going to run at a loss. First and foremost, you are expected to be experienced in the financial industry. It will pay you to study accountancy or banking and finance if indeed you want to venture into this line of business.
It is important to state that a prepaid credit card company is a highly risky venture because you stand the chance of getting your money trapped by those who for one reason or the other won’t be able to pay back the loans they got as at when due.
It is very important that you analyze the existing prepaid credit card companies in and outside of your area. You would be required to check the existing competition as well as know their strengths and weaknesses. Knowing the weaknesses of the existing prepaid credit card companies around you means that you would be able to learn from their mistakes and in turn come up with a better prepaid credit card company devoid of the mistakes and weaknesses of others.
So, if you have done the required feasibility studies and market research, then you might want to venture into this business.
Starting a Prepaid Credit Card Company Like Visa – A Complete Guide
- Industry Overview
The Prepaid Credit and Debit Card Providers industry is made up of companies that issue preloaded, open-loop credit and debit cards to consumers for making purchases. Electronic Benefits Transfer (EBT) cards or closed-loop, store-branded gift cards et al are not part of the Prepaid Credit and Debit Card Providers industry.
The Prepaid Credit and Debit Card Providers industry is indeed in a mature stage of its growth. The industry is characterized by growth in line with the overall outlook of the economy, consolidation from the largest players in the industry and wholehearted market acceptance of industry products and services. The prepaid credit and debit card providers line of business will continue to be in high demand by the general public in the United States.
If you are a close observer of the Prepaid Credit and Debit Card Providers industry, you will agree that the industry has experienced strong growth over the years. Despite the fact that the slow recovery preceding the recession hampered many other industries, the weak economy played to this industry’s strength. Less number of consumers qualified for credit and bank accounts hence opting for prepaid cards. A growing need for electronic payment forms and rising fees in traditional banking institutions made prepaid cards attractive.
The Prepaid Credit and Debit Card Providers industry is indeed a large industry and pretty much active in most developed countries of the world most especially in the United States of America, United Kingdom, Japan and Canada et al.
Statistics has it that in the United States of America alone, there are about 285 registered and licensed (big, medium scale and small) Prepaid Credit and Debit Card Providers firms scattered all across the United States responsible for employing about 8,411 people and the industry rakes in a whooping sum of $5 billion annually.
The industry is projected to enjoy 21.8 percent annual growth within 2011 and 2016. The establishments with the lion share of the available market in this industry in the United States of America are Blackhawk, Green Dot Corporation and NetSpend Corporation.
A recent report released by IBISWORLD shows that the Prepaid Credit and Debit Card Providers industry is in the growth stage of its life cycle, indicated by a positive industry value added (IVA) and a growing number of establishments.
The report shows that the IVA which measures the industry’s contribution to the overall economy, is expected to increase at an annualized rate of 9.8 percent over the 10 years to 2021. In contrast, US GDP is projected to grow at an annualized rate of 2.1 percent during the same period. These figures signify that the industry is expected to experience stronger growth than the overall economy, a characteristic indicative of an industry in the growth of phase of its economic life cycle.
One thing is certain about starting a prepaid credit and debit card company, if you are able to conduct your market research and feasibility studies, you are more likely not going to struggle to secure clients because there are always clients all across the United States who would need your services from to time.
The fact that prepaid credit and debit card companies have being in existence for a long time in the United States of America, does not in any way make the industry to be over saturated. The fact that there are people out there who would always need quick loans to spend from time to time makes the business ever green.
Lastly, with prepaid credit and debit card company, you can afford to partner with financial institutions especially banks so as to get a good leverage to build your company. The bottom line is that if you have a robust network and you are well positioned, you can indeed maximize profits with your prepaid credit and debit card company.
Starting a Prepaid Credit Card Company – Market Research and Feasibility Studies
- Demographics and Psychographics
The demographic and psychographic composition of those who require the services of prepaid credit and debit card companies cut across corporate executives and business owners cum entrepreneurs and students et al who need quick cash to spend but don’t have the money in their bank account or the requirements to access loans from banks and other standard financial lending institutions.
So, if you are looking towards defining the demographics for your prepaid credit and debit card company, then you should make it all encompassing. It should include corporate executives, start – ups, entrepreneurs, aspiring entrepreneurs, students and casual and full – time workers within and outside the city you are operating in.
List of Niche ideas Within the Credit Card Issuing Industry That You Can Specialize in
Most prepaid credit and debit card companies tend to operate general services that a standard prepaid credit and debit card company is expected to offer. That is why it seems that there are no niche areas in the industry. But on the other hand, some prepaid credit and debit card companies may decide to major in some key areas or niche areas such as;
- Issuing prepaid debit and credit cards
- Providing reloading services
- Issuing replacement debit and credit cards
- Providing financial advice to individuals and small businesses
The Level of Competition in the Prepaid Credit and Debit Card Providers Industry
No matter the line of business you decide to pitch your tent, you are still going to compete with others who are into the same area of business and prepaid credit and debit card services business is not an exemption.
The level of competition in the prepaid credit and debit card providers industry depends largely on your financial base (the liquid cash you can afford to lend out per – time) and how big and organized your prepaid credit and debit card company is.
The truth is that no matter the level of competition in an industry, if you have done your due diligence and you brand and promote your products or services properly, you will always make headway in the industry. Just ensure you have what it takes to raise capital for your business, to reclaim loans from debtors and you know how to reach out to your target market (those who need prepaid credit and debit card services and can successfully pay back without must stress).
List of Well – Known Brands in the Credit Card Issuing Industry
It is a known fact that in every industry, there are always brands that perform better or are better regarded by the customers and general public than the others. Some of these brands are those that have been in the industry for a long time, while others are best known for how they conduct their businesses and the results they have achieved over the years.
These are some of the leading prepaid credit and debit card companies in the United States of America and also in the globe;
- Green Dot Corporation
- NetSpend Corporation
- American Express Serve Prepaid Credit Card
- Vision Premier Visa Prepaid Credit Card
- PayPal MasterCard Prepaid Credit Card
- H&R Block Prepaid Emerald MasterCard
- Green Dot Prepaid Visa and MasterCard
- Kaiku Visa Prepaid Credit Card
- Mango Prepaid MasterCard
- Brink’s Money Prepaid MasterCard
- AccountNow Prepaid Visa and MasterCard
- READYDebit Visa Prepaid Credit Cards
- Western Union NetSpend Prepaid MasterCard
- BB&T Prepaid MoneyAccount
- American Express Bluebird Prepaid Credit Card
- JCB International Credit Card Co Ltd
- Midnight Prepaid Visa® RushCard
- Walmart MoneyCard® Visa® with Cash-Back Rewards
- Sequin KLS Prepaid Visa® RushCard
When it comes to starting a prepaid credit and debit card company, you just have to get your feasibility studies and market research right before venturing into the business. It is good to mention that the prepaid credit and debit card business is not for rookies; it is for professionals who have successfully gathered the required experience and expertise to handle such business.
Starting this kind of business definitely entails that you raise plenty of start – up capital (pool cash from interested investors). If you are already a wealthy person, this might not be an issue, but if you are not, you may want to consider pulling resources from family and friends. Depending on the scale you want to start from, you might require as much as multiple thousands of dollars to strike this off.
You will be expected to hire the services of experts that will help you with comprehensive economic and cost analysis and the profitability of the business within the location that you intend launching it. If you get your economic and cost analysis right before launching the business, you may not have to stay the long before you breakeven.
Starting Your Prepaid Credit and Debit Card Company from Scratch vs Buying a Franchise
When it comes to starting a business of this nature, it will pay you to buy the franchise of a successful prepaid credit and debit card company as against starting from the scratch. Even though it is relatively expensive buying the franchise of an established prepaid credit and debit card company, but it will definitely pay you in the long run.
But if you truly want to build your own brand after you must have proved your worth in the alternate financial services industry, then you might just want to start your own prepaid credit and debit card company from the scratch.
The truth is that it will pay you in the long run to start your prepaid credit and debit card company from the scratch. Starting from the scratch will afford you the opportunity to conduct thorough market survey and feasibility studies before choosing a location to launch the business.
Please note that most of the big and successful prepaid credit and debit card companies around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success.
Possible Threats and Challenges You Will Face When Starting a Prepaid Credit and Debit Card Company
If you decide to start your own prepaid credit and debit card company today, one of the major challenges you are likely going to face is the presence of well – established prepaid credit and debit card company, payday loan and check cashing services firm, merchant cash advance services firm and also other related financial lending businesses (micro money lending services, micro – finance banks who are offering similar services that you intend offering. The only way to avoid this challenge is to create your own market.
Other threats that you are likely going to face as a prepaid credit and debit card company operating in the United States are unfavorable government policies, fraudulent people who may not want to pay back the loans collected, the arrival of a competitor within your location of operation and global economic downturn which may affect your ability to raise working capital. There is hardly anything you can do as regards these threats other than to be optimistic that things will continue to work for your good.
Starting a Prepaid Credit Card Company – Legal Matters
- Best legal entity to use for this type of business
When considering starting a prepaid credit and debit card company, the legal entity you choose will go a long way to determine how big the business can grow; some prepaid credit and debit card company design their business and services for regional/community market, some for national market, while others for international market via online platform.
Generally, you have the options of either choosing a general partnership, or limited liability company which is commonly called an LLC for a prepaid credit and debit card company. Ordinarily, general partnership should have been the ideal business structure for a small – scale prepaid credit and debit card company especially if you are just starting out with a moderate start – up capital.
But if your intention is to grow the business and have clients both corporate and individual from all across the United States of America and other countries of the world, then choosing general partnership is not an option for you. Limited Liability Company, LLC will cut it for you.
Setting up an LLC protects you from personal liability. If anything goes wrong in the business, it is only the money that you invested into the limited liability company that will be at risk. It is not so for general partnerships. Limited liability companies are simpler and more flexible to operate and you don’t need a board of directors, shareholders meetings and other managerial formalities.
These are some of the factors you should consider before choosing a legal entity for your prepaid credit and debit card company; limitation of personal liability, ease of transferability, admission of new owners, investors’ expectation and of course taxes.
If you take your time to critically study the various legal entities to use for your prepaid credit and debit card company, you will agree that limited liability company; an LLC is most suitable. You can start this type of business as limited liability company (LLC) and in future convert it to a ‘C’ corporation or a ‘S’ corporations especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will give you the opportunity to grow your prepaid credit and debit card company so as to compete with major players in the industry; you will be able to generate capital from venture capital firms, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures.
Catchy Business Name Ideas Suitable for a Prepaid Credit and Debit Card Company
Generally, when it comes to choosing a name for a business, it is expected that you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Usually it is the norm for people to follow the trend in the industry they intend operating from when naming their business.
If you are considering starting your own prepaid credit and debit card company, here are some catchy names that you can choose from;
- Apple Prepaid MasterCard
- Flash Money Prepaid MasterCard
- Go to Cash Prepaid Visa and MasterCard
- On the Go Debit Visa Prepaid Credit Cards
- Spenders Prepaid MasterCard
- CC&T Prepaid MoneyAccount
- New York Express Bluebird Prepaid Credit Card
- PIB International Credit Card Co Ltd
- Prime Focus Int’l Credit Card, Inc.
- Get It Now Credit Card, Inc.
In the United States of America and in most countries of the world, you can’t operate a business without having some of the basic insurance policy covers that are required by the industry you want to operate from. So, it is imperative to create a budget for insurance policy covers and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your prepaid credit and debit card company.
Here are some of the basic insurance policy covers that you should consider purchasing if you want to start your own prepaid credit and debit card company in the United States of America;
- General insurance
- Risk Insurance
- Credit insurance
- Deposit insurance
- Financial reinsurance
- Lenders mortgage insurance
- Health insurance
- Liability insurance
- Workers compensation
- Overhead expense disability insurance
- Business owner’s policy group insurance
- Payment protection insurance
Intellectual Property Protection/Trademark
If you are considering starting your own prepaid credit and debit card company, usually you may not have any need to file for intellectual property protection/trademark. This is so because the nature of the business makes it possible for you to successfully run the business without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.
But if you just want to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO.
Is Professional Certification Needed to Run a Prepaid Credit Card Company?
Aside from the results you produce as it relates to return on investment (ROI), professional certification is one of the main reasons why some prepaid credit and debit card companies stand out. If you want to make impact in the prepaid credit and debit card providers industry, you should work towards acquiring all the needed certifications in your area of specialization.
You are strongly encouraged to pursue professional certifications; it will go a long way to show your commitment towards the business. These are some of the certifications you can work towards achieving if you want to run your own prepaid credit and debit card company;
- Certified Financial Expert (CFE)
- Certificate in Finance and Technology
- Financial Literacy Certification: NFEC CFEI
- Degree in Finance Related Courses
Please note that you can successfully run a prepaid credit and debit card company in the United States and in most countries of the world without necessarily acquiring professional certifications as long as you have adequate experience cum background in the financial services industry.
List of Legal Documents You Need to Run a Prepaid Credit and Debit Card Company
The essence of having the necessary documentation in place before launching a business in the United States of America cannot be overemphasized especially a business like the prepaid credit and debit card company. It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, it won’t be too long before the long hand of the law catches up with you.
These are some of the basic legal documents that you are expected to have in place if you want to legally run your own prepaid credit and debit card company in the United States of America;
- Certificate of Incorporation
- Business License and Certification
- Business Plan
- Non – disclosure Agreement
- Employment Agreement (offer letters)
- Operating Agreement for LLCs
- Insurance Policy
- Consulting contract documents
- Apostille (for those who intend operating beyond the United States of America)
- Company Bylaws
- Insurance Policy
- Memorandum of Understanding (MoU)
Financing Your Prepaid Credit and Debit Card Company
Aside from the required capitalization and pool – funds to invest with, starting a prepaid credit and debit card company can be cost effective. Securing a standard office in a good business district, equipping the office and paying your employees are part of what will consume a large chunk of your start – up capital.
No doubt when it comes to financing a business, one of the first things and perhaps the major factor that you should consider is to write a good business plan. If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for start – up capital for your prepaid credit and debit card company;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Sell of shares to interested investors
- Applying for loan from your bank
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends
Choosing a Suitable Location for your Prepaid Credit Card Company
Prepaid credit and debit card business and most alternative financial services based type of businesses requires that most often than not, you see physically with your clients hence it must be located in good location; a location that is prone to both human and vehicular traffic and a location that is at the epicenter of a business district if indeed you want to attend to loads of clients and maximize profits from the business.
The fact that you can operate your prepaid credit and debit card company from any part of the world does not mean that location has little influence on the success of a prepaid credit and debit card company. If you have taken your time to study the prepaid credit and debit card industry, you will realize that companies and related businesses are willing to pay expensive rents in order to stay in a busy business district; a place where financial activities are at its peak.
It cannot be overemphasized that the location you chose to open your prepaid credit and debit card company is key to the success of the business, hence entrepreneurs are willing to rent or lease a facility in a visible location; a location where the demography consists of people with the required purchasing power and lifestyle.
So, if you are looking for a location for your prepaid credit and debit card company, ensure that it is a place that is in a business district in your city, a place that is visible and easily accessible. Of course, you would not want to locate this type of business in the outskirts of town. Your clients should be able to drive down and locate your office with little or no difficulty. Vendors also should be able to easily locate your office when they have to come submit their bid/proposals, documents or for background checks et al.
Starting a Prepaid Credit Card Company – Technical and Manpower Details
On the average, there are no special technologies or equipment needed to run this type of business except for customized prepaid credit and debit card, loan services software apps and other financial related software apps and social media management software applications. So also, you will definitely need computers, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves) and all these can be gotten as fairly used.
When it comes to choosing between renting and leasing an office space, the size of the prepaid credit and debit card company you want to build, and your entire budget for the business should influence your choice. If you have enough capital to run a standard prepaid credit and debit card company, then you should consider the option of leasing a facility for your office.
As regards the number of employees that you are expected to kick start the business with, you would need to consider your finance before making the decision. Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Fund Manager/Portfolio Manager, Risk Manager, Accountant, Business Development Executive/Marketing Executive, Loan Officers, Debt Collectors, and Customer Service Officer or Front Desk Officer.
Over and above, you would need a minimum of 10 to 20 key staff to effectively run a medium scale but standard prepaid credit and debit card company.
The Service Delivery Process of a Prepaid Credit and Debit Card Company
On the average, the way prepaid credit and debit card companies work varies from one agency to another, but ideally, a prepaid credit and debit card company is expected to first and foremost build a robust company profile before sourcing for working capital.
Basically, prepaid credit and debit card company firm operates in the same way other micro lending services firms do. They get people to invest with them and pay them interest, while lending out that money to people who ask for loans via prepaid credit and debit card and charging interest on those loans.
Just like payday loan and check cashing services firms/cash advance firms/micro lenders, the difference between prepaid credit and debit card company and banks is that banks have a ceiling on the amount of interest they can charge, which is stipulated in the Usury Act. Prepaid credit and debit card companies can charge any interest rate they like because of an exemption in the Usury Act.
It is important to state that a prepaid credit and debit card company may decide to improvise or adopt any business process and structure that will guarantee them good return on investment (ROI), efficiency and flexibility; the above stated business cum services process is not cast on stone.
Starting a Prepaid Credit Card Company – The Marketing Plan
- Marketing ideas and Strategies
As a prepaid credit and debit card company owner, you would have to prove your worth over and over again before attracting investors and individuals to give you the needed liquid cash/working capital. So, if you have plans to start your own prepaid credit and debit card company, it will pay you to build first build a successful career in the alternative financial services industry.
People and organizations will only commit their money under your care if they know that they are going to get good returns on their investment.
So, when you are drafting your marketing plans and strategies for your prepaid credit and debit card company, make sure that you create a compelling personal and company profile. Aside from your qualifications and experience, it is important to clearly state in practical terms what you have been able to achieve in time past as it relates to the alternative financial services industry and the organizations you have worked for.
This will help boost your chances in the market place when sourcing for clients/investors. Here are some of the platforms you can utilize to market your prepaid credit and debit card company;
- Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, students, households, start – ups, small and medium scale business community in the location you intend operating your business
- Advertise your business in relevant financial magazines, radio and TV stations (make yourself available for prepaid credit and debit card services related talk shows and interactive sessions on TV and Radio)
- List your business on local directories
- Attend international financial cum investment expos, seminars, and business fairs et al
- Create different packages for different category of clients in order to work with their financial needs as it relates to loan and interest rates
- Leverage on the internet to promote your business
- Join local chambers of commerce and industries around you with the main aim of networking and marketing your services; you are likely going to get referrals from such networks
- Engage the services of marketing executives and business developers to carry out direct marketing
Factors That Will Help You Get the Right Product Pricing
One key factor that will help you offer your services or give out loan with interest rate that is highly attractive is to ensure that you source your working capital from sources that won’t put pressure on you or give you high interest rate.
Another strategy that will help you offer your services or issue loans at the right price (competitive interest rate) is to ensure that you cut operational cost to the barest minimum, and channel your efforts towards marketing and promoting your brand name. Aside from the fact that this strategy will help you save cost, it will also help you get the right pricing for your products and services.
You can also try as much as possible to work with independent contractors and marketers; it will help you save cost for paying sales and marketing executives.
Strategies to Boost Your Prepaid Credit Card Issuing Company Brand Awareness and Create Your Corporate Identity
If your intention of starting a prepaid credit and debit card company is to grow the business beyond the city where you are going to be operating from to become a national and international brand, then you must be ready to spend money on promotion and advertisement of your brand.
In promoting your brand and corporate identity, you should leverage on both print and electronic media and also social media (the internet). As a matter of fact, it is cost effective to use the internet and social media platforms to promote your brand, besides it is pretty much effective and wide reaching.
Another strategy is to sponsor relevant community based programs, TV and radio programs, advertise your business in relevant magazines and newspapers. Below are the platforms you can leverage on to boost your brand and to promote and advertise your business;
- Place adverts on financial magazines and related newspapers, radio and TV stations
- Encourage the use of word of mouth publicity from your loyal customers
- Leverage on the internet and social media platforms like YouTube, Instagram, Facebook, Twitter, LinkedIn, Snapchat , Google+ and other platforms to promote your business
- Ensure that you position your banners and billboards in strategic positions all around your city
- Distribute your fliers and handbills in target areas in and around our neighborhood
- Contact corporate organizations, students, households, start – ups, small and medium scale business community in the United States et al by calling them up and informing them of your organization and the services you offer
- Advertise your business in your official website and employ strategies that will help you pull traffic to the site
- Brand all your official cars and ensure that all your staff members and management staff wears your branded shirts or caps at regular intervals.