Cloud-based platforms and delivery channels to unlock new corporate prepaid revenue streams

Corporate or commercial prepaid is one of the fastest growing segments within payments. Businesses are increasingly discovering that prepaid cards – whether physical or virtual – are capable of addressing many corporate issues more efficiently than existing payments solutions, writes Alex Mifsud

Corporate or commercial prepaid is one of the fastest growing segments within payments. Businesses are increasingly discovering that prepaid cards – whether physical or virtual – are capable of addressing many corporate issues more efficiently than existing payments solutions, writes Alex Mifsud

Typical corporate problems that prepaid can solve include payroll, travel and expenses, supplier payments, corporate purchasing, disbursement and incentives programmes.

MasterCard estimates corporate prepaid to account for $385bn of spend by 2017 . At a survey conducted earlier this year by Ixaris of 181 banks, financial institutions, payments processors, programme managers and payments consultants active in the prepaid industry, 73% stated that corporate prepaid is presently or soon going to be an important source of revenue growth for banks and non-bank FIs.

Many of the firms with profitable corporate prepaid offerings today are actually non-bank financial institutions without the advantage of embedded relationships with corporate customers. Banks are even better placed to benefit from the corporate prepaid opportunity because they tend to have close relationships with large numbers of corporate customers and can use their relationship managers to up sell effectively to them.

Up until now, however, banks have been hamstrung from taking full advantage of corporate prepaid.

Technology can be a barrier to new revenues

One of the major hurdles for many banks seeking to implement a corporate prepaid programme is the bandwidth of the IT department. IT resources for innovation have been dealt a double blow in the aftermath of the financial crisis: IT departments are currently swamped with ‘keep the lights on’ projects to deal with regulation such as SEPA and Basel III. On top of that, since Basel III and Dodd-Frank impose more stringent capital requirements upon banks, capital expenditure budgets have been slashed. The result is that as financial institutions look to build up their balance sheets, any new project needs to reach market quickly and cost effectively.

Banks can and probably should look to outsource some or all of the running of their corporate prepaid offering, enabling them to generate new revenues with the possibility of low capital outlays. Before they do so, however, they need to understand what is needed for success.

First, there is no such thing as a one-size-fits-all corporate prepaid application. An application to carry out a monthly payroll run will be very different from an automated mass purchasing application in regular use, for example. The requirements for the user experience, appropriate controls, risk and compliance management, pricing, etc vary widely across corporate applications. In addition, each corporate client will impose their specific demands that systems would need to accommodate.
Even when banks have worked out what their corporate clients need, they tend to find that the solutions on offer from the established outsourced processors lack rich functionality. They also still require the bank to invest in developing the required additional technology and services for corporate programs . What banks really need is a suite of purpose-designed corporate prepaid applications that can address a wide array of common corporate requirements while offering enough flexibility for the bank to create diverse configurations with little effort.

A cloud-based solution is increasingly the best approach

One approach that promises a smoother and faster way into corporate prepaid for banks is offered by a new breed of cloud-based platforms termed by Gartner as ‘application platform as a service’ (aPaaS). Gartner notes that aPaaS – such as Ixaris Payments Server – should be a central requirement for banks looking to renew their card management software, to enable end user-controlled customisation and the ability to deploy new capabilities quickly .

Such aPaaS offerings come with ready-built apps that are easily customisable to the needs of banks and their corporate clients. In selecting an appropriate aPaaS, a bank should make sure that the apps supported have already been tested with a wide array of corporate clients across a range of industries.

The other advantage of aPaaS is that as the platform is based in the cloud, banks would be able to start selling and delivering corporate prepaid programmes in weeks rather than months or years, and without having to spend a large amount of capital up front or time implementing complex IT systems. In-house programmers do not have to build software from scratch for the bank to set up its corporate prepaid offering.

In the survey mentioned above, of those banks convinced of the revenue opportunity for corporate prepaid, 72% agreed that in-the-cloud outsourcing was a viable option. A less appreciated point is that, by providing a holistic view of program activity, running programs on a comprehensive aPaaS can be less risky than the traditional outsourcing of discrete components of prepaid processing.

Delivery channels are also key. It has become more common for corporate clients to ask for services to be delivered through APIs. In the same survey, 61% of banks that believe in the corporate prepaid opportunity agreed that payment service delivery via API and/or configurable toolkit was viable, subject to appropriate diligence.

Unlock fresh corporate prepaid revenues with cloud-based platforms

Corporate prepaid is a here and now opportunity for banks looking to generate new revenue. Fortunately we are now seeing cookie-cutter yet highly flexible platforms emerge which enable banks to deliver true corporate prepaid solutions for their clients. Even in these times of constrained capital budgets, savvy banks are starting to take advantage of cloud-based platforms and delivery channels to grab a slice of the lucrative corporate prepaid market today.

Alex Mifsud is founder and CEO of Ixaris, a payments innovations company. Ixaris recently released Ixaris Payments Server, a cloud-based application platform for corporate prepaid.