Breaking News – Chase to Exit Corporate, Public Prepaid (Jan. 9, 2014)
JPMorgan Chase & Co. is seeking to exit the corporate and public prepaid sectors. In a statement today, the company said it plans to “explore a full range of options for its prepaid card business, including a sale.” That business includes Chase’s Corporate, U.S. Public Sector and Electronic Benefit Transfer and Health Savings Accounts programs, the company said. The bank’s Liquid consumer prepaid card platform, however, will not be affected by the decision.
The news comes just over a month after JPMorgan Chase notified 465,000 holders of government benefits and corporate prepaid cards issued by the bank that their personal data may have been exposed to hackers when the systems behind its UCard Web portal were breached last summer. The bank then mailed incorrect replacement cards to 4,000 people receiving benefits from the state of Connecticut, drawing the ire of state officials.
According to Madeline Aufseeser, senior analyst with Aite Group, “Managing the [corporate and public prepaid] business is a bit tricky,” adding that the segments were a small part of JPMorgan Chase’s overall business.
As to possible suitors for Chase’s units, Aufseeser identified big-name corporate prepaid providers including First Data Corp., ADP and Comdata, along with Bank of America and U.S. Bank (which acquired FSV Payment Systems in late 2012) as among possible candidates to acquire the business. A corporate prepaid-focused provider could then opt to spin off the public prepaid business segment in a future sale, she notes.
Prepaid payroll cards have come under fire over the past several months; in July, following the publication of a New York Times story critical of fees linked with payroll cards, New York State Attorney General Eric Schneiderman sent a letter to more than 20 employers seeking information about their programs. Weeks later, a group of 16 U.S. Senators called on federal regulators to launch a probe into prepaid payroll cards.