As a former regulator and co-founder of a mobile payments startup, this one's a headscratcher. Is this a less profitable version of HigherOne? Is it Simple for a smaller market and four years too late? Do they think there'll be enough prepaid interchange to pay for rising customer acquisition costs, loyalty programs, and infrastructure? This has become a fairly mature and competitive market - they're going up against WalMart and AmEx, and it seems like a company with such a troubled history chose to pivot into an extremely tough spot.
And then there's the future regulatory headaches that are coming down the pike. It's unclear how much of the advertising about fees on the website would survive Reg DD scrutiny if this were a debit card. It's not. Like Simple, it's a general purpose reloadable (GPR) prepaid card. There aren't substantive regulations on disclosure yet, although the CFPB has announced rules coming in this area: http://files.consumerfinance.gov...
Still trying to figure out how this is going to work out well.
@megerman Hey Mark! We don't make [EDIT: profit] on interchange, and don't plan to [EDIT: we get the standard interchange income for issuing banks as revenue]. All of that money goes back into the Treats program.
As far as fees, we have a pretty comprehensive set of disclosures on our site, all of which we are presently waiving (and hope to eliminate entirely as we gain traction).
@21echoes That's not too surprising, given the relative bargaining power with your issuer - most startups can't really control much of those economics. But not taking any interchange and remitting it all to the networks or your issuer, that seems off.
Still, the formula for a GPR is pretty straightfoward. Fees + Interchange + Float - Customer Acquisition - Overhead - Fraud = profit. Sounds like you have no interchange revenues, a costly loyalty program, and there's no way you're going to make money off float given what interest rates are. This isn't rocket science - this is just the very straightforward economics of a well-understood product that anyone can buy off a j-hook at a WalMart, CVS, etc.
Breakage can't save this model either - escheatment takes care of that. LevelUp tried losing money on interchange and making it up on loyalty, but well, they quickly learned that didn't work. So I just don't get the economics at play for this product. Unless this whole thing is a loss leader to move students onto higher-margin financial tools, consider me puzzled.
Cover is hiring. We make money on every transaction. I highly recommend it.
@megerman Sorry, to be clear: we don't make *profit* on interchange, we re-invest it in Treats (our rewards program). Edited my comment above accordingly.
@adamevers I might be able to help:
1) it's a pure black debit card
2) use the card, and you get Treats
3) send treats to another member, and their next purchase could be free
4) you can use the app, too: send money to other members, limit / track your spending, and other goodies.
Sure, its venmo. But its mostly about giving and getting Treats. A campus with Treats flying around is a bundle of surprise and joy
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@robertoryan this is a great explanation of the new offering. However, I get none of this from the current landing page.
So it's a card that... Gives you rewards? I mean... Isn't that like every card out there?
Why... Why would I use this over my Amex or another card?
Their pitch is... Incomplete. Flat. Unappealing. No reason to switch.
I'm just sad about the whole Clinkle episode.
These comments are gonna be a shit show.
@yurylifshits yup! with plenty more in the pipeline :D
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On the homepage they have a section saying "We're not into fees", but a quick look at their agreement has a long list of fees, including fees to add money to your card https://www.clinkle.com/legal/ba...
- $0.50 per transaction to add money via qualified debit card
- $0.30 + 2.9% per transaction to add money via non-qualified debit card
- $1 ATM fees
- 3% international transaction fees
Are these fees common with prepaid debit cards? I can't see someone being too excited to realize that, in some cases, they only have $485 to spend after loading up $500.
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