Prepaid card reload networks provide consumers with a way to add funds to reloadable prepaid debit cards at participating retail locations. As the prepaid market expanded, control over these networks and their retail distribution points became increasingly important to program managers seeking convenient ways for cardholders to fund their accounts.
InComm’s planned Vanilla Reload Network highlighted both the opportunities and competitive tensions surrounding prepaid card reload networks. A dispute with nFinanSe over participation in the network and its proposed $3.95 consumer reload fee raised questions about distribution agreements, competition, and the strategies providers could use to expand their retail reach.
This short article in BusinessWeek telegraphs the future introduction of a Vanilla reload network from InComm, identifies the cost of a reload transaction conducted on that network, and indicates the tactics InComm has taken to drive adoption of the reload network by as many program managers as possible. Apparently NfinanSe has decided that those tactics border on restraint of trade and have filed a law suit to that point.
“Interactive allegedly conveyed to nFinanSe its intention not to fulfill its contractual obligations as distributor unless nFinanSe agreed to join Interactive’s “Vanilla Reload Network,” which would set a uniform $3.95 fee for consumers seeking to add money to their prepaid debit cards.
Interactive’s actions constitute an illegal restraint of trade and violate U.S. antitrust laws, nFinanSe claimed in the complaint.”
Speculation is that this legal activity has less to do with NfinanSe adopting a new reload network and more to do with InComm gaining the ability to reload its products at the retail locations that are currently the exclusive domain of NfinanSe. Time will tell.
The dispute between InComm and nFinanSe illustrated how competition in the prepaid industry extended beyond the cards themselves. Access to retail locations where consumers could conveniently reload their accounts represented an important component of a prepaid program’s value and potentially a significant competitive advantage.
As prepaid card reload networks expanded, relationships among distributors, program managers, and retailers would play an increasingly important role in determining which services gained adoption. The legal challenge also demonstrated how efforts to expand a reload network could create broader questions about competition and control of valuable retail distribution channels.
