Central National Bank Finds Growth Opportunities In Prepaid Card Space

Deal with Postilion enables CNB to issue and process prepaid cards for other banks, retailers. By Maria Bruno-Britz, Bank Systems & TTechnologyCentral National Bank of Enid (CNB; Enid, Okla.) is expanding its relationship with S1's self-service technology unit Postilion (Atlanta) in a deal where the vendor will promote and market CNB's prepaid cards to other financial institutions.

CNB may be a $437 million asset bank, however, it is capitalizing on the prepaid card business in a big way. The bank acts as an issuer and processor of these cards to retailers and other community banks throughout the country. Products run the gamut, according to Brud Baker, CNB president, from retail cards, to payroll cards to gift cards. The bank's initial focus was the Hispanic market, but that has expanded to the unbanked in general, including students.

"This is a hot market," says Baker of prepaid cards. "We got started in the prepaid business because we needed to grow. 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 teamed up with Postilion, which had been handling its ATM switch for several years, and together, they worked on a prepaid card software solution set that CNB now shares with other community financial institutions. CNB is an issuer and processor for other banks. For instance, Baker says that 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."

Baker notes that CNB's bank clients can offer the prepaid cards as MasterCard, Visa or Discover and that they can be branded with any bank's logo on the front.

According to Baron Unbehagen, VP of marketing and alliances, with Postilion Americas, CNB's prepaid program uses several technologies from Postilion to enable its services, including the PostCard card management program; the PostOffice management console that allows the bank to drive reports relative to its business; and the Postilion Realtime Framework, which provides generic EFT processing.

In many cases, when entering the unbanked space, much of a bank's time and energy is spent not on the implementing the programs themselves, but in doing the research, notes Unbehagen. "With CNB's project overall, the majority of their time was spent researching what they should and should not do in this market as it relates to risk, compliance and knowing the customers. There are so many issues involved when you focus on customers who don't have traditional banking relationships," he explains. "You have to invest in the relationships. For smaller institutions, this is often a difficult hurdle for them because it requires due diligence and people who understand the prepaid market. So there's a significant opportunity to leverage an ASP model [like CNB's]."

According to Unbehagen, Postilion has already referred a number of its financial institution clients to CNB for the prepaid program.

Both men agree that this service will provide significant growth opportunities for banks, especially smaller FIs. "Our model lets community banks get into the game at virtually no cost and with a good piece of revenue share," says CNB's Baker. "It's very expensive and difficult to steal other banks' customers. So banks are going to look at the unbanked. This is a very good market for community banks."

"The majority of small institutions trying to get into the unbanked space predict decent volumes but they just can't make the investments," says Postilion's Unbehagen. "There's really not much investment to be made in the applications-it's more in the marketing and outreach to these consumers. The goal of the CNB partnership is to remove this barrier to entry for community FIs to enter this market."