American Banker (article and link below) published an interesting story worth reading for banks and other FI’s considering a prepaid strategy. Namely, how to address the small business marketplace with a meaningful payments product. In this case, a company called PEX has targeted a market that has immediate need, namely, small businesses with employees and contractors that need to purchase supplies for jobs. The use case offered is a good one — a plumbing company that needs to enable its plumbers to buy supplies after they assess the job, but can’t be expected to front the money for the supplies from the supply store. It takes care of two big problems (one of which not mentioned by the article). First, it relieves the company of issuing credit cards (which in a small business comes with joint AND several liability — a big issue). Second, it relieves suppliers from offering house credit to its small business and contractor customers. In our work with players such as ACE Hardware and ProBuild, this is a big issue.
As prepaid goes through its maturation cycle, this product seems to serve a clear need and should tip over into general use. Banks and credit unions looking to serve small businesses like these would be well-served to evaluate what is a clear solution to a real problem.
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