The Engage FT platform enables banks to offer payment cards with enhanced spending and security controls, which we refer to as “enhanced control” payment cards. There are three primary trends driving the “enhanced control” payment card market. The first of these trends is driven by consumer demand for payment cards to use as simple budgeting tools. A strong indicator of this trend is the prepaid debit card market, which is projected to grow to 89 million active cards by 2016. The initial focus of prepaid debit cards was as a bank account alternative for consumers that did not qualify for a bank account. As prepaid debit cards became more popular, more and more consumers with bank accounts started using prepaid cards, to the point where banked consumers now represent 59% of the prepaid debit card market. Of the 89 million prepaid debit cards projected in 2016, 37 million will be used by banked consumers for budget related transactions. These banked consumers are using prepaid cards as digital envelopes to implement an “envelope budget system” that helps them control spending and manage a budget.
At Engage FT, we identified this prepaid debit card budgeting trend (which we refer to as “spend control”) early on and developed a set of spend control features and an associated mobile App that addresses this trend by creating a virtual “envelope budget system” for prepaid cards. We also developed products to bring the “envelope budgeting” metaphor to debit and credit cards. This expanded the potential spend control payment card market from prepaid debit cards only to 396 million active payment cards (debit, credit and prepaid) in 2017.
A second major trend driving the “enhanced control” payment card market is driven by consumer demand for enhanced security controls on their payment cards. In the last six months there have been multiple high-profile payment card data breaches at Target, Home Depot, Kmart, and JPMorgan Chase Bank that have affected over 76M households in the United States. These data breaches have shaken consumer confidence and heightened concerns about payment card security. As a result, many consumers are looking for payment cards that offer enhanced security. A recent survey by Mercator Advisory Group (Customer Monitor Survey, Payments, 2014) indicates that 41% of consumers are seriously interested in card account controls on payment cards. At Engage FT, we also identified this trend early on and have built enhanced security features into our Engage FT platform. These features enable banks to offer enhanced security on Engage FT enabled debit, credit, and prepaid cards.
The third major dynamic driving the market trend for enhanced control payment cards is the banking industry’s desire to drive incremental payment card revenues. Banks are responsible for issuing payment cards that use payment networks like Visa and MasterCard. A bank makes money every time a consumer uses a payment card issued by that bank. This revenue is generated through bank interchange fees (card swipe fees), which are collected from the merchant and average over 1% or the transaction amount. Payment card revenues are a significant source of revenues for banks so any features that maximize use of a banks payment cards are extremely valuable.
Engage FT enhanced payment cards maximize card use and bank revenues in two ways. The first is by making the enhanced card the payment card of choice for the consumer. The second is by motivating consumers to eliminate cash transactions by using the payment card instead of cash. The Engage FT spend control features and associated mobile App compel consumers to use their payment card on all transactions so that they can accurate track spending by category. Using the Engage FT platform the overall effect on revenue can be significant for a bank. As an example, a bank can more than double monthly household revenues from card interchange fees by adding spend control features to a bank’s debit card.