ECOM Readies an Anonymous Prepaid Card for Web and Point of Sale

After five years of development, Boca Raton, Fla.-based startup ECOM Financial Corp. is planning to introduce an anonymous, disposable prepaid card that will clear transactions through the MasterCard network and be usable for purchases on the Internet as well as at the point of sale. The company, which says it is in serious talks with a trio of major, unnamed merchants about selling its ECOM MasterCard, hopes to begin a six-week pilot in January to be ready in time for the rush of transactions that typically develops around Valentine's Day and plans to have millions of cards issued a year after the launch. The keys to the new card, says chief executive Isidore Papadopoulos, is its anonymity and its MasterCard brand, which allows it to take advantage of the bank card network's widespread acceptance network as well as its clearing and settlement mechanism. “It's the only [card] in the U.S. that's truly anonymous,” he says. “We don't collect any information from the consumer?no name or address.” By freeing up consumers from having to enroll, register, or otherwise take time to give identifying data, he says, ECOM can sell its cards through major-brand merchants as if they were cans of pop or other merchandise, a form of mass distribution that Papadopoulos says is critical to long-term success. At the same time, the company's arrangement with MasterCard allows buyers of the prepaid card to use it immediately anywhere MasterCard is accepted, including on the Web. Without giving details, Papadopoulos says ECOM has worked out a method by which the ECOM cards, which will carry standard 16-digit account numbers and expiration dates, can pass online merchant's address-verification checks. Nor will he give specifics about how transactions will be processed through MasterCard's network. ECOM will derive revenue from interchange as well as interest it earns on prepaid funds, account fees it assesses on remaining value after cards expire, and promotional fees from companies branding the card. Cards will be assigned a card ID number that will come with the cards when sold but will not appear on the cards. In cases when cards are lost or stolen, holders can call ECOM or go to its Web site, identify themselves with the ID number, and disable the cards. Papadopoulos says his plan calls for issuance of 4.6 million cards in 2006, a number he says should grow to 38 million by the end of 2007. Commercial launch, however, depends on the company's ability to secure a $7-million round of financing, which it is actively seeking. The funding, which will supplement the $1.2 million private investors have so far sunk into ECOM, will among other things allow the company to sign pending issuing agreements with two banks, which it will not name. A veteran of both the banking and software industries, Papadopoulos says ECOM has been working on its prepaid card since 2000, when it was intended to be an instrument with which teens could pay for copies of song downloads?long before anyone had heard of Napster. One of the fledgling company's greatest challenges has been satisfying regulators that the card?and its anonymous nature?satisfy various know-your-customer requirements. “We've met with the U.S. Treasury and have been through the whole regulatory structure,” Papadopoulos says, adding the card is compliant with both the U.S. Bank Act and the Patriot Act. Negotiating the maze of federal law, as well as navigating MasterCard's rules, took several years, he says. Helping to allay fears of money-laundering or other illicit activity is the fact that ECOM limits the cash value that can be loaded onto the card to $500, half the cap called for under the Patriot Act, Papadopoulos says. “If you want a $100,000 card, you can get it, but you'll have to go to the issuing bank, and you'll no longer be anonymous,” he says. The company, which boasts a head count of 16, including former bankers and payment-network executives, has also filed patents on its methodology, which are pending.