published Wednesday, April 4th, 2012

TransCard transforms the prepaid debit industry

Craig Fuller is CEO of TransCard, a company that provides prepaid debit cards through banks.
Craig Fuller is CEO of TransCard, a company that provides prepaid debit cards through banks.
Photo by John Rawlston.
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Quick, what's the difference between a pirate and a banker?

The parrot.

Of course, there are other differences, too. Bankers are notoriously risk-averse, whereas pirates aren't.

But in today's world, the risk managers need the risk-takers more than ever, according to TransCard officials, who manage billions of dollars for banks every year.

"We're rebels," explained Sara Lemons, an account manager for TransCard.

Next to her cubicle, the company's 50 employees have strung lines of Jolly Roger flags down the corridor, a playful poke at the deadly-serious seas of high finance they navigate on a daily basis. It's an office where workers aren't afraid to laugh and joke, a place where bosses bestow silly badges for jobs well done.

"We do it a little bit differently than others," Lemons said.

They way the company explains it, TransCard is a start-up venture designed to help banks offload risk in today's post-recession reality. As financial privateers, they capture the treasure that banks can't or won't go after.

A decade ago, the company wouldn't have existed in its current form, because it's a solution to a fairly recent problem.

Making money

The problem for banks began when legislators took away the fees that historically made up a major chunk of revenue. Then, consumers rebelled when banks tried to tack on new charges.

Now, huge swaths Americans are choosing alternative banking services like check cashing and payday loans instead of traditional banking.

As a result, banks -- especially community banks -- are scrambling to find new ways to make money and reach out to those who may not otherwise have bank accounts.

Enter TransCard, which promises to turn the Dodd-Frank Act from a headache into a high-five, according to CEO Craig Fuller, son of trucking pioneer Max Fuller.

"There are 40 million customers that the banks just don't make money on," he said. "We walk in and help them make it profitable."

Fuller's secret is to turn unprofitable bank clients into profitable ones by creating branded -- or white label -- prepaid debit cards for banks and running the entire show from Chattanooga.

"If we're doing our job right, the customers never knows who we are," he said.

He splits the fees with the bank, everybody makes money, and the customer gains access to banking services they might otherwise have shunned.

Banking blues

Banks immediately jumped on the idea of contracting out the prepaid debit cards business. Outsourcing means no capital investment to build the call centers, servers and operations. Instead, it's a steady, reliable, risk-free stream of income.

Plus, the prepaid debit cards are popular with unbanked, underbanked or underage segments of the population.

"It allows the institution to service these consumers," Fuller said. "They think they're talking to the bank, but they're actually talking to us."

TransCard grew from a client list of one in 2010 to 56 at the end of 2011, and Fuller expects that to double in 2012, he said.

"We're really competing against bank habits more than external competition," he said.

Banks must make $320 per customer per year to break even on the cost of supporting that client. Under Dodd-Frank fee rules, that's a lot harder than it used to be. But by contracting with a firm like TransCard, banks can jump from a $320 liability to a $70 profit per customer without lifting a finger, he said.

Another key to success is not being a bank. As a nonbank, TransCard isn't subject to the same regulatory burden and has much lower infrastructure costs than banks.

"The moment a bank brings that in-house, examiners and regulators start looking at it," he said.

Treasure

It's also easier for a nimble business like TransCard to upgrade customers to the latest and greatest tech trends.

Fuller, for instance, keeps his credit card in his watch. In fact, his watch is his credit card. The same technology works with cell phones too. He just taps his watch against specially-outfitted machines and the payment goes through.

"We're building on technology that's new, so mobile technology and web based software is easy for us," he said. "Most banks are working with 20-year-old technology, and they're having to build on top of that."

Fuller already has shown that he has the ability to grow TransCard's revenues at an astonishing, triple-digit rate. He's shown that he understands the mobile market. So what's next?

Going public and issuing stock for others to invest in the business.

"We've forced banks to look at their banking completely differently," he said. "It's the kind of recipe for an initial public offering within three to five years."

about Ellis Smith...

Ellis Smith joined the Chattanooga Times Free Press in January 2010 as a business reporter. His beat includes the flooring industry, Chattem, Unum, Krystal, the automobile market, real estate and technology. Ellis is from Marietta, Ga., and has a bachelor’s degree in mass communication at the University of West Georgia. He previously worked at UTV-13 News, Carrollton, Ga., as a producer; at the The West Georgian, Carrollton, Ga., as editor; and at the Times-Georgian, Carrollton, ...

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