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Stored value cards are most similar to a bank checking account debit card. However, instead of opening a bank account, the funds of the cardholder are pooled with all of the other cardholders.

The SVC industry is considered to be in the early stages, as these types of cards were only introduced in the last decade. For the first several years, they were only used as gift cards, replacing the traditional retail gift certificate. These are considered to be "closed loop" cards, as they can only be purchased and redeemed at a particular retailer.
 

Resources (Links)

Payment Instrument Choice: The Case of Prepaid Cards Federal Reserve Bank of Chicago paper on Stored Value Cards, 2006

Stored Value Cards: An Alternative for the Unbanked? Federal Reserve Bank of New York report on the SVC market, 2004

Stored Value Cards: A Scan of Current Trends and Future Opportunities A July 2004 report from The Center For Financial Services Innovation

Stored Value Cards and Financial Institutions (pdf) A white paper from PULSE EFT, a major network operator, that provides fundamental information about SVC programs.

The Value in Stored Value an article in BAI's Banking Strategies magazine from 2003.

Stored Value Cards: Challenges and Opportunities for Reaching Emerging Markets a working paper prepared for the Federal Reserve Board in 2005

FDIC Proposed Rules for Stored Value Deposits from the Federal Register.

 

 

Arriba cards, on the other hand, are considered to be "open loop" cards. This means that the cards can be used virtually anywhere and can be loaded with value in many different ways.

As this is a relatively new industry, no clear market leader has emerged as yet. Several technical factors have limited the opportunities for SVC issuers. These include:

  • Lack of "loading networks" to place value onto cards easily

  • Pricing from banks and processors that force high consumer charges

  • Lack of processing functionality to address SVC opportunities

  • Regulatory issues and Customer Identification Procedures

Only recently have these factors been addressed. There are now competing loading network providers that Arriba can partner with to provide nationwide loading options for our cardholders, including MasterCard's rePower network.

Bank and processing prices have dropped as more competition has appeared, offering Arriba the opportunity to offer the most competitive value propositions to our customers.

Processors have graduated from simple "closed loop" mentalities to more aggressive market-driven functionality, allowing Arriba to offer features and benefits previously relegated to the "big boys."

The FDIC is planning on addressing the deposit issue regarding stored value cards and is expected to offer deposit insurance on all SVC accounts on a "pass-through" basis. Arriba stays on top of all regulatory issues and maintains strict Know Your Customer guidelines.

For more information on stored value cards, follow the links on the left. For more information on our card programs, contact us.
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