By: Robin Arnfield
VRL provides independent incisive analysis and insight for the global cards and payments community.
Mint was the first prepaid MasterCard program manager in Canada, launching a general-purpose prepaid MasterCard in 2005. It launched a prepaid MasterCard for Canadian Tire, one of Canada's largest DIY chains, in 2008, as well as prepaid cards for Canadian music and media group Much Music. However, Mint came to see that the real growth opportunity lay, not in Canada, but in the Middle East.
"We concluded that we were in the right business but in the wrong part of the world," says Chris Hogg, Mint's executive chairman. "In Canada, the vast majority of the population has bank accounts, and there is very strong debit card penetration. But in the Middle East, 90 percent of the population is unbanked."
"In 2009, Mint identified an opportunity to enter the UAE prepaid card market through a partnership with Nabil Bader, who owned electronic payroll processor and prepaid payroll card issuer Waseela Equity," says Vishy Karamadam, managing director of Ubika Research, a Toronto-based independent equity research firm. In September 2009, Mint bought 60 percent of Waseela, and appointed Bader as Mint's president and CEO.
Bader had been instrumental in persuading the UAE government to pass a law called the Wages Protection System (WPS) in 2008 that mandated electronic salary payments to unbanked foreign workers. Until the law came into effect in 2009, the majority of the UAE's 5 million foreign workers, mostly from countries such as India and Pakistan, were paid in cash.
"The WPS law was designed to guarantee that foreign workers get paid what they are contracted to receive," says Hogg.
"Cash payments were problematic, for example due to employers missing payments or being late," says Karamadam. "So there were a lot of grievances."
Waseela had already started issuing prepaid payroll cards to its construction company clients' workforces prior to its relationship with Mint. So Mint merged its business with Waseela and made some enhancements to the platform that it had developed in Canada and which it now uses for prepaid card issuance in the Middle East.
"We started out with 40,000 cards contracted in the UAE, and in December 2011 this had risen to 420,000, with USD100+ million a month loaded onto the cards for payroll," says Hogg.
In early 2010, Mint closed down its Canadian prepaid card operation, while retaining its listing on the Toronto Stock Exchange's Venture Exchange and its Canadian corporate office.
Because UAE regulations require prepaid card program managers to be sponsored by local banks, Mint has Standard Chartered Bank and Ajman Bank as its UAE banking sponsors.
In July 2011, Mint acquired Workers Equity, another UAE electronic payroll processor, which had been owned by Bader until he sold it to a Kuwaiti businessman in 2007. Mint has also recently acquired the remaining 40 percent of Waseela that it didn't own.
"Buying Workers Equity gave us 150,000 additional prepaid payroll cards, including a MasterCard-branded prepaid payroll card portfolio of 40,000 cards," says Hogg. "Our other cards are private-label cards that can be used at any ATM in the Gulf Region to withdraw cash, but cannot be used for point-of-sale transactions."
Mint is closely aligned with MasterCard, Hogg says. "We were a MasterCard Service Partner (MSP) in Canada from 2005, and are currently in the process of transferring the Workers Equity MasterCards over to Mint," he says. "We are currently evaluating the prospect of migrating all our private-label prepaid cards to MasterCard by the second quarter of 2012."
When the UAE prepaid payroll card market got underway following the introduction of electronic salary payments, local banks and foreign exchange houses started issuing prepaid payroll cards, says Karamadam. "The banks issued prepaid payroll cards because their corporate clients asked them to do this, so that they would comply with the WPS law," he says. "The local foreign exchange houses that handle cash remittances for foreign workers to their home countries also entered the prepaid payroll card market."
But the banks and foreign exchange houses are finding it challenging to make money out of prepaid payroll cards. "Our customer base earns less than USD1,000 a month, which means it isn't viable for banks to cross-sell financial products to them," says Hogg. "The UAE foreign exchange houses find that prepaid cards are a non-core business for them compared to their lucrative money remittance business," says Karamadam.
A core strategy for Mint is to acquire banks' prepaid payroll card portfolios and to offer an outsourced prepaid card issuance service to foreign exchange houses. A typical bank portfolio consists of 10,000-30,000 prepaid cards.
As of December 2011, Mint manages six foreign exchange house prepaid card portfolios in the UAE. "The foreign exchange houses put their brand names on the cards and issue the cards to their customers, but the portfolio belongs to Mint," says Karamadam.
"We are currently talking to local UAE banks about acquiring and/or servicing their prepaid card portfolios," says Hogg. "We have signed a contract with a top five global bank to service its UAE prepaid card portfolio, and will be announcing the deal shortly. Providing outsourced prepaid cards to banks will be an important part of our UAE growth strategy, going forward."
Mint currently has prepaid payroll card contracts with nine of the top 12 construction and engineering companies in the UAE, Hogg adds.
Room for growth
The UAE's WPS law does not cover the roughly 1 million domestic workers, who include household maids and drivers, and the 500,000 foreign employees who work in the UAE's nine economic free trade zones. "The UAE still has a lot of room to grow in prepaid payroll cards," says Karamadam.
"The UAE government has encouraged electronic salary payments for free trade zone workers, but hasn't mandated this as yet," says Hogg. "An electronic payment system is also a possibility for domestic workers in the UAE, but, as yet, nothing formal has been developed or announced."
Hogg says that, if the UAE government does mandate prepaid payroll cards for domestic workers, Mint will have several distribution methods. "The channel for issuing prepaid cards to domestic workers when they first come to the UAE will be when they are granted their visa and work permit on arrival," he says. "Mint will provide a facility in the UAE's 20 immigration offices for new domestic workers to get a prepaid payroll card."
It will be more challenging to issue prepaid cards to domestic workers who are already in the country, Hogg admits. "Most likely we will provide a kiosk-based instant issuance solution and online application forms for household employers to use to get prepaid cards for their domestic workers," he says.
New business areas
Mint has set up a new business called Mint Money which will launch three products to the company's existing customer base in the next two quarters. "The first is a money remittance service," says Hogg. "Currently, our prepaid cardholders withdraw cash from ATMs using their cards and then go to the nearest Western Union office and send cash home to their relatives. We can capture this remittance business direct from our cards."
The second product is cell phone airtime top-up. "Our prepaid cardholders also use the cash they withdraw from ATMs to buy airtime at their mobile company's retail store," says Hogg. "So we will offer them cell phone top-up direct from their cards."
The third product, microcredit, will have the biggest impact, Hogg says. "In March 2012, we will start offering personal loans that will be loaded directly onto our prepaid payroll cards, in partnership with a UAE bank," he says. "The loans will vary from three months to two years and will be up to USD1,000. In this economic environment, banks find it impossible to lend to our customer base, because their incomes are too low. As we control our cardholders' payroll, we are able to collect repayments for the loans. We anticipate that our cardholders will be very receptive to our microcredit product."
To facilitate the transaction processing of these new products, Mint has formed a joint venture with Canadian transaction processor Carta Worldwide called Mint Global Processing.
Currently, Mint has offices in the UAE, Qatar and Jordan. "We plan to use the Jordan office as a springboard to provide prepaid payroll cards to construction firms in Erbil, capital of Iraqi Kurdistan, where there is a construction boom taking place," says Hogg. "Some of our UAE construction company clients want us to issue prepaid cards to their workers in Qatar. We will be issuing 60,000 cards in Qatar by the second quarter of 2012."
In addition to Iraq, Mint also plans to offer prepaid cards in Egypt, Sudan, Angola and Saudi Arabia, and are currently actively working on proposals in these countries. "These are some of the toughest countries in the Middle East North Africa (MENA) region," says Hogg. "But we see an opportunity to help unbanked, cash-based workers achieve financial inclusion in these countries, which helps to promote stability. We've been working in each of these countries for the past six months."