Maverick Launches with Merchant-Issued Debit Cards, Prepaid Cards

Processors' experimentation with debit cards is taking on even more variety with the entry of Wilmington, Del.-based startup Maverick Network Solutions Inc. into the market. Maverick, which has brought together a handful of long-time payment-industry executives and received $1.5 million in venture funding in December, expects to begin a pilot in April with a 220-store convenience store chain in Upstate New York for a PIN-secured debit card product that combines payment with loyalty and lets merchants act as the issuer. The company also markets prepaid cards for incentives and rewards and a prepaid parking decal that allows municipalities to collect parking fees. The popularity of debit cards has attracted a wide array of product innovations. In recent years, companies like Tempo Payments Inc. have introduced debit products for issuance by merchants, while others, such as Infinity Network LLC, are working on debit-loyalty combinations that work with driver's licenses (Digital Transactions News, April 29, 2008). Two years ago, Capital One Financial Corp. stunned the electronic-payments business with a debit card concept that relies on the automated clearing house network and allows Cap One to issue cards that draw on accounts held at other banks. Tempo Payments has introduced similar so-called decoupled debit products. Maverick's niche, explains Peter J. Quadagno, an electronic-payments veteran who serves as the company's president and chief operating officer, is its technical expertise. The company's chief executive is Jim Shanahan, a former MBNA Corp. and MasterCard executive. “We got into this because we thought we could execute better than the next guy,” Quadagno tells Digital Transactions News. “We looked at this as an execution play, not an intellectual-property play. We've spent all of our money and most of our time assembling a technical team [with a payments background]. The fledgling company is calling on that experience to help it recruit electronic funds transfer networks, which it relies on to route transactions from merchants' existing point-of-sale terminals to Maverick's servers, and to sign up merchants and service providers as issuers. So far, First Data's Star network has agreed to let the company use its network through sponsor bank Palm Desert National Bank, and Quadagno says discussions with the other national EFT networks are in progress. Maverick is aiming its debit card product primarily at the petroleum, c-store, grocery, and drugstore markets, though Quadagno says other retail and service industries could be added later on. Though the EFT systems would route transactions, Maverick relies on the ACH for settlement. Merchants get their funds in two days, Quadagno says. The fee is 25 cents per transaction, of which about 30% goes back to the EFT network, says Jack Piet, national sales manager for retail at Maverick. Merchants pay EFT-network interchange fees, but recover these sums as the issuers, leaving a quarter as their net per-transaction cost. Maverick can control transaction risk through positive-file checks, though Piet says functions like risk-management and features like guaranteed funds add to the fee. Maverick's fee should be a selling point with merchants upset with credit card acceptance costs and even the costs of bank-issued debit cards, Quadagno argues. “We make that part of the pitch,” he says. “As the price of gas has dropped, so has [c-store merchants'] inclination to fight with Visa and MasterCard, but [that animosity] doesn't ever go away.” Maverick also hopes to attract both merchants and consumers by working with an unnamed company to add technology that can track transactions and let cardholders collect rewards for repeat purchases. “We have to sell the retailer, then sell the consumer,” says Quadagno. Meanwhile, Maverick plans to mine the potential in prepaid cards, particularly those used by companies to hand out incentives and rewards. Within weeks, says Quadagno, it will launch a Visa-branded, non-reloadable prepaid card for Bluegreen Corp. that the Boca Raton, Fla.-based time-share-resort and golf-community developer can use to load incentives for potential buyers to hear presentations. “This prepaid industry is still nascent,” says Quadagno in describing the potential for Maverick. Nor is he concerned about the state of the economy right now. “We find we are in a recession-proof business,” he says. “We're in the right place at the right time.”