Galileo, a Combo Product Provider, Switching Issuers
Launder, William, American Banker
The Salt Lake City processor Galileo Systems Inc. says the combination prepaid debit and secured credit card it began marketing last year is so popular that it has outgrown its issuer, MetaBank.
David Wilkes, the head of strategic alliances at Galileo, said it is in the process of switching issuing banks for the UltraVX card. He would not identify the new issuer, except to say that it "specializes in credit" - unlike MetaBank, a Storm Lake, Iowa, unit of Meta Financial Group Inc. that issues mostly prepaid cards.
The UltraVX card, which runs on the Visa Inc. network, has found 300,000 takers since Galileo introduced it about seven months ago, Mr. Wilkes said. His company is also in talks with several top 10 issuers about using the card's technology for their own platforms, he said.
The product's main selling point is that it can help consumers build or repair their credit histories.
The card is linked to three accounts: a regular debit account, a secured account, and a credit line. The available credit matches the amount of funds the cardholder puts in the secured account as collateral plus the cash balance - the secured account must have $500 and the cash account must have $25, for example, if the cardholder wants to make $525 in credit card purchases.
The minimum payment on the credit line is made each month through an automatic transfer from the debit account, though the cardholder can pay the line in full. The payment history is reported to the credit bureaus.
Of course, the security deposit for the credit line means the consumer does not get any funds up front. But Tim Sloane, the director of debit advisory services at the Waltham, Mass., research company Mercator Advisory Group, said, "What the UltraVX does is make that process of freeing up funds easier."
Trent Sorbe, the senior vice president of credit products at Meta Payment Systems, the prepaid division of MetaBank, said, "It's only logical that as the product comes out of its beta stage, that UVX looks to go to a place with a lot of expertise in credit card lending."
Other prepaid specialists have entered the credit business recently. Since last year Green Dot Corp. of Monrovia, Calif., has been testing a Visa card with a $200 line of credit sold at checkout counters to anyone who can verify their identity, regardless of creditworthiness. Some specialists have been more cautious. Last year NetSpend Corp. of Austin announced a plan to market a prepaid card with $300 of overdraft protection for the payday lender Ezcorp Inc. MetaBank would have issued the card for Netspend and Ezcorp, but the plan was later scrapped, Mr. Sorbe said.
The UltraVX card had been marketed through online aggregators such as Credit.com Inc., though Mr. Wilkes said deals with retailers are in the works. …