Central national bank of Enid (CNB) may have just $437 million in assets, but the Enid, Okla.-based community bank is capitalizing on the prepaid card business in a big way. The bank acts as an issuer of prepaid cards to retailers and other community banks and provides associated processing services.
CNB -- whose products run the gamut from retail cards to payroll cards to gift cards -- is expanding its relationship with S1's Postilion (Atlanta) unit in a deal in which the vendor will promote and market CNB's prepaid cards to other financial institutions. According to Brud Baker, the bank's president, CNB's service provides growth opportunities for financial institutions, especially smaller banks. "Our model lets community banks get into the game at virtually no cost and with a good piece of revenue share," he says.
"We got started in the prepaid business because we needed to grow," adds Baker. "We've given it a lot of thought and think this is going to be the largest retail growth segment for the financial services business."
CNB initially teamed with Postilion, which had been handling the bank's ATM switch for several years, and together they developed a prepaid card software solution set that CNB now offers to other community financial institutions. For instance, Baker relates, CNB has deals with two community banks in the wine region of California's Sonoma County. "They have corporate customers that employ large numbers of unbanked people, so they issue our payroll cards to them," he says, noting that CNB's bank clients can offer the prepaid cards as MasterCard, Visa or Discover, and they can be branded with any bank's logo.
According to Baron Unbehagen, VP of marketing and alliances for Postilion Americas, CNB uses several Postilion solutions, including the PostCard card management program; the PostOffice management and reporting console; and the Postilion Realtime Framework, which provides generic EFT processing. He says the vendor already has referred financial institution clients to CNB for the prepaid program.
Tapping the Unbanked
CNB's initial foray into prepaid cards was focused on the Hispanic market, but that has expanded to the unbanked in general, including students, the bank's Baker says. "It's very expensive and difficult to take other banks' customers," he explains. "So banks are going to look at the unbanked. This is a very good market for community banks."
In many cases, when entering the unbanked space, much of a bank's time and energy is spent not on implementing the programs themselves, but in doing the research around determining risk and compliance in this new market, notes Postilion's Unbehagen. "For smaller institutions, this is often a difficult hurdle because it requires due diligence and people who understand the prepaid market," he adds. "So there's a significant opportunity to leverage an ASP model," such as the service offered by CNB.
"Since we are the card issuer, the primary responsibility for compliance as well as risk rests with us," says CNB's Baker. "The community bank's role is to determine market potential and, of course, to sell."
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