Blackhawk Makes a Big Jump into Reloadable Prepaid Cards

Blackhawk Network, the supermarket-based prepaid card specialist firmly rooted in gift cards, announced on Monday its first major foray into general-purpose reloadable (GPR) prepaid cards. The move puts Blackhawk into direct competition with powerhouses Green Dot Corp. and NetSpend Inc., but that’s okay, according to chief marketing officer Teri Llach.

“We really felt that it was time for grocery to move into this area,” Llach tells Digital Transactions News. “I certainly think that as these [GPR cards] become mainstream that there’s enough room” for Blackhawk Network.

Blackhawk calls its new Visa-branded cards PayPower. Issued by Storm Lake, Iowa-based MetaBank, they come in a standard version and travel version that offers lost-luggage insurance, travel and emergency assistance, and travel offers. Purchase and reload fees are $3.95, and the cards have a $5.00 monthly fee. ATM withdrawals cost $1.95. Bill payments, direct deposits, and customer-service calls are free.

Blackhawk, a subsidiary of the big grocery-store chain Safeway Inc., Pleasanton, Calif., entered the gift card business about nine years ago and its Gift Card Mall racks are now common in supermarkets. Blackhawk, which sells 350 different cards, has about 80,000 U.S. distribution outlets that include 92% of the top 50 grocery chains.

A large number of those supermarkets will soon be selling PayPower cards, which will represent a change from grocery stores’ traditional role in the prepaid business mostly as sellers of closed-loop gift cards. “It’s definitely something new for groceries, but so were gift cards eight years ago,” says Llach.

GPR cards, however, are growing much faster than closed loop cards nowadays. Blackhawk is positioning the PayPower cards as not just for unbanked or underbanked consumers, as most such cards are. The company says they’re also for mainstream consumers looking for more payment options or wishing to avoid getting dinged by penalty fees on conventional credit and debit cards, or being charged for customer service as some prepaid cards do, according to Llach. Besides a federally required summary of the card’s fees on the packaging, customers can pull out a more detailed pricing list without buying the card. The PayPower cards will replace an earlier GPR card that Blackhawk marketed in a low-key way and which will be discontinued.

Consumers will be able to reload the cards in several ways. They can present the card and funds at the store. If they’re not carrying the card but are at the store, they can buy a chit and later call Blackhawk’s interactive voice-response system and enter the chit’s code to connect the funds to the card. Cards also can be reloaded by direct deposit.

Getting consumers and supermarket employees versed in reloads will require some education, Llach says. Blackhawk is supporting the card with a multipronged marketing effort that includes in-store signs and promotions, employee training, and out-of-store marketing. Llach wouldn’t give a dollar figure for the campaign but says, “I can tell you it’s multiple millions.”

In some ways, new gift card regulations that are part of the CARD Act Congress passed last year could make the job of making GPR cards stand out from gift cards easier because the law requires sellers to separate the two types. “I think a big part of the success of this is going to be the same with all prepaid cards, and that’s going to be educating the consumers,” says Ben Jackson, an analyst in the prepaid advisory service at Mercator Advisory Group Inc.

Jackson doesn’t see Blackhawk Network’s cards themselves as breaking new ground, but he says the company is playing to its strengths. “They’re entering a market that’s already crowded, but they’ve got a nice distribution channel in all of these grocery stores,” he says. “Now the question will become, will they be able to get people to recognize the card for what it can do and will consumers who are shopping in these stores look for that kind of a service there.”

In other news, Blackhawk Network last week announced that Don Kingsborough, chief executive and a company founder, has taken the post of executive chairman and will focus on new business opportunities rather than day-to-day operations. The former executive chairman, William Y. Tauscher, is the new chief executive. Tauscher was managing member of the Tauscher Group, which provides management assistance to companies in the home-products, transportation, telecommunications, and real-estate industries.