The Explosion of Prepaid Debit Cards
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NetSpend Holdings (NASDAQ: NTSP) announced recently that is bringing PayPal’s Prepaid Mastercard to 7-Elevens as the exclusive program manager and processor for the card. The move will aid prepaid card users, but can also boost NetSpend’s financial position in this rapidly growing industry.
The stock recently reached $8.97 which was within it 52-week trading range of $3.90 and $10.22. The company is expected to release its earnings report for the second quarter of 2012 on July 30. I suspect that its full year earnings report for 2012 will reflect the profits it makes from this new partnership.
Partnering with the reputable PayPal, owned by eBay (NASDAQ: EBAY), gives the provider of general-purpose reloadable prepaid debit cards another advantage over its competitors. The deal should also play favorably for eBay. PayPal officials say that plans call for more partnerships for its prepaid card with other brick-and-mortar retailers this year because of the demand in this industry.
Consumers are increasingly turning to the prepaid debit card market to handle their banking needs instead of using traditional bank services. Even JPMorgan & Chase (NYSE: JPM), the country’s largest bank, is trying its hand in the prepaid debit market. Last month, it announced its plans to launch Chase LiquidSM, a reloadable card launched through a pilot program this summer. NetSpend’s other competitors include Green Dot Corp. and DFC Global Corp.
Also noteworthy is the fact that 7-Eleven is the largest chain in the convenience retail industry. Dan Henry, NetSpend’s chief executive officer, pointed out that 7-Eleven will be the first major retailer to offer the PayPal prepaid card to consumers throughout the U.S.
Executives at 7-Eleven say they are seeing an increased demand for prepaid products partly because of the convenience they provide as well as choice. PayPal was a good fit “because the brand already resonates with many consumers who want more financial flexibility and alternatives to traditional retail banking," the company said in a statement.
The PayPal prepaid card will be sold in about 5,500 stores once it is completely rolled out by the end of the year. In addition to being able to buy the card, current cardholders will be able to reload cash on their cards at 7-Elevens.
The cards are issued by The Bancorp Bank, a wholly owned subsidiary of The Bancorp Inc.
This is not the only piece of positive investment news from NetSpend in June. Around the middle of the month, the company’s board of directors announced that it had authorized a $75 million share repurchase program.
The repurchase plan will be executed over the next 12 months. The share repurchases will be made on the open market, through block trades, through 10b5-1 plans, in privately negotiated transactions, according to the company. The amount of shares purchased and the timing of the purchases will be based on working capital requirements, general business conditions and other factors, including alternative investment opportunities, according to NetSpend.
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