Philip Keitel of the Payments Cards Center at the Federal Reserve Bank of Philadelphia published "Insolvency Risk in the Network-Branded Prepaid-Card Value Chain", September 2011.
From the summary:
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 Springbok Services, Inc.
Monday, October 3, 2011
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