IDEAS home Printed from https://ideas.repec.org/p/fip/fedpdp/11-05.html
   My bibliography  Save this paper

Insolvency risk in the network-branded prepaid-card value chain

Author

Listed:
  • Philip Keitel

Abstract

The value chain for network-branded prepaid cards involves more parties than those commonly present in credit- or debit-card issuing arrangements: the merchant acquirer, processors, a payment network, and a card-issuing bank. These additional participants may include a program manager, a distributor, and a seller. Since a number of independent businesses make up the chain, each one, as well as cardholding consumers, could be exposed to losses resulting from the insolvency of another party in the value chain. This risk is both real and manageable, as illustrated by two recent incidents involving network-branded prepaid cards: the failures of Silverton Bank, N.A.. and Sprinbok Services, Inc. The Payment Cards Center of the Federal Reserve Bank of Philadelphia hosted a workshop of March 17, 2011, to examine the implications of insolvency in the network-branded prepaid-card value chains, to review how market participants have responded to this risk, and to discuss controls the industry has developed to mitigate and address these challenges, Kirsten Trusko, president of the Network Branded Prepaid Card Association (NBPCA); Terry Maher, partner at Baird Holm LLP and general counsel to the NBPCA; Jeremy Kuiper, managing director of the Bancorp Bank; and Ted Martinez, head of Visa?s North America credit settlement risk team, led the workshop. This paper summarizes the information presented at the workshop, including the ways in which consumers and businesses are protected from the insolvency of the issuing bank or a key participant. In addition, this paper highlights practices that have been developed in the industry to mitigate this risk.

Suggested Citation

  • Philip Keitel, 2011. "Insolvency risk in the network-branded prepaid-card value chain," Consumer Finance Institute discussion papers 11-05, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpdp:11-05
    as

    Download full text from publisher

    File URL: https://www.philadelphiafed.org/-/media/frbp/assets/consumer-finance/discussion-papers/D-2011-September-NBPCA-Keitel.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hiroaki Kuwahara & Kazuaki Hara, 2022. "Prepaid Cards: A Case Study of Japan, the United States and the European Union," IADI Fintech Briefs 10, International Association of Deposit Insurers.

    More about this item

    Keywords

    Electronic funds transfers;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedpdp:11-05. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Beth Paul (email available below). General contact details of provider: https://edirc.repec.org/data/frbphus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.