Phones 4U is targeting 10,000 debit card sales per month by early 2010, when marketing starts to give its new prepay debit cards proper traction in the market.
New Phones 4U subsidiary E.Z. Pay, led by former 4U Business managing director Paul Smith, has launched Escape MasterCard and Neon MasterCard in conjunction with Newcastle Banking Society and Barclays.
Smith said: “This will be a multi-million pound, profitable business. We want volumes of 10,000 per month by the time it is fully marketed – Q1 is reasonable, following the focus on Phones 4U’s core retail business running through Christmas.”
The Escape card is pitched to ethnic minorities and low-income groups. The Neon card is aimed at the youth market. Both propositions extend common banking priveleges to demographics that tend to survive on cash alone, and which Phones 4U claims to over-index in. Around seven million in the UK have either no bank account at all, or no ready card access to transactional banking services, it claimed.
The Escape card allows an efficient and cheap overseas money transfer service. Smith said the ethnic market, typically, makes wire transfers at £15-£25 per £200 cash payment.
The Escape card allows free money transfer to ‘companion’ cards – users are required to purchase and post a separate card for each recipient, who can draw down money on MasterCard overseas.
Money transfers are guaranteed to complete within 60 seconds, and can be instigated by SMS, as well as by going online or calling a telesales agent.
For low-income groups with limited access to banking, the Escape card allows them to load up credit and spend at will. Likewise, the Neon card affords teenagers, commonly restricted to cash purchases, freedom to shop with plastic. It also allows parents peace of mind in case children are stuck without funds, pointed out Smith.
The prepay cards work in 28 million retailers and 1.5 million ATMs worldwide, said Phones 4U. They have no barrier to entry – they cost £19.99 (including £10 credit) from Phones 4U stores, all 450 of which will be selling them by the end of the month.
Credit top-ups are free at Phones 4U stores, 99p at Post Office outlets and at three per cent of the credit load at Paypoint terminals. Card users are not required to be Phones 4U mobile customers.
Customers are allowed a maximum Escape card balance of £650-£3,000 and maximum annual cash throughput of £650-£60,000, depending on how much personal information they divulge at sign-up.
Customers taking anonymous cards, with no identity proof, are restricted to £650 on both; those providing proofs and personalising cards can put up to £60,000 through. The balance limit on the Neon card is £500; the throughput limit is £6,000. Parents must go online to agree Neon card terms before it is activated for purchases.
Customers also get cashback credited to their cards for purchase made online with certain retailers – Phones 4U claims to have agreed terms with over 1,000 brands, including JD Sports, Nike, Apple, easyJet, Pizza Hut, Napster.
Smith compared the new Phones 4U offering with the recent launch of O2 Money, a similar prepay card initiative by network operators O2.
““Ours is a standalone product – if just want card, we’ll sell you it.
The O2 offer requires you to be an O2 contract customer, or an O2 prepay customer topping up credit each quarter. It means that if the O2 mobile proposition is not best suited, you have to stick with it to continue using the prepay debit card,” he said.
“As well, O2 doesn’t offer the same features and benefits. It is offering no international money remittance service and does not have cashback partners built in to card scheme.”
E.Z. Pay and Phones 4U will make slim margins on card sales and purchases, with a marginal kickback from MasterCard. “It is clearly a volume play,” said Smith.
The cards comply with FSA and anti money-laundering regulations, and Smith said E.Z. Pay and Phones 4U have organised system alerts to tell on likely frauds.
“We have alerts against certain behaviours, which is charted and investigated if necessary. Accounts can be suspended or frozen. The service is compliant, and we have taken the utmost precautions to prevent card fraud.”