Pay Linx ROB-Mar-26-08 Article by leader6



RBC looks to market prepaid benefits cards
Bank teams up with Edmonton firm to get governments to replace cheques
with debit cards



March 26, 2008

Royal Bank of Canada wants to cash in on the growing appetite for prepaid cards by
marketing electronic benefit cards to governments across Canada, a development that
could take a bite out of the cheque-cashing businesses.

RBC, the country's biggest bank, has been working with a young Edmonton-based
company, Pay Linx Financial Corp., to develop a card that allows government benefit
payments to be doled out on prepaid cards rather than cheques.

The cards have been tested in a pilot project with the Alberta government, which has
been experimenting with offering social assistance payments on them. Recipients who
choose to receive their payments on a prepaid card can use them at any store or bank
machine that accepts debit cards.

The cards will likely be offered province-wide this spring, said Dorothy Schreiber, a
spokesperson for Alberta's ministry of employment and immigration. "Some people
would take their cheques to cheque-cashing places and be charged a high fee," she said.
"With the card, they get all of their cheque."

Prepaid cards are a relatively new stomping ground for Canadian banks, and both RBC
and Pay Linx are putting their creative talents to use to develop new ways of using them,
such as insurance payments, corporate bonus programs, and travel cards.

"People have started to put their toe in the water in this space," said Anne Koski, head of
card innovations at RBC. The total potential market for prepaid cards in Canada exceeds
$100-billion while a more realistic figure is $35-billion to $50-billion, she said. The U.S.
market is already about $157-billion, she said.

"It's a different business," she said. "Like all things Royal Bank, we like to take a look at
things a long, hard way before we decide to move forward."

RBC first took notice of Pay Linx in early 2006, when the Alberta pilot project was
getting under way, and last year the bank bought 25 per cent of the TSX Venture
Exchange- listed company. Yesterday, the companies announced a deal for RBC to
provide the benefit cards, which it is now pitching to governments. "We're in the process
of talking to pretty much all of the governments across Canada about this new capability
that we'll be able to offer," Ms. Koski said.

Bank of Montreal recently launched a prepaid travel Mosaik MasterCard, a type of hybrid
between a credit card and a traveller's cheque. A spokeswoman for Toronto-Dominion
Bank said yesterday that prepaid cards are "a market we are interested in, but nothing to
report at the moment."

So-called "closed- loop" prepaid cards, such as those that are issued by retailers to be used
in their own stores, have already taken off exponentially, Ms. Koski said. "But one of the
other trends that's been happening primarily in the U.S., but also in other parts of the
world as well, is the growth of what are called open- loop prepaid cards," she said.

While the cards are often branded Visa or MasterCard, in Canada they can also be done
with Interac, a national payment network for debit cards. "That was where we've decided
to focus our attention first," Ms. Koski said. While Ms. Koski's already dreaming up a
myriad of uses for prepaid cards, the bank is focusing on this government offering for the

"We're hoping with this card program that consumers will end up getting more of the
funds that the government's allocating as opposed to paying fees to a cheque-cashing
outlet," she said.

One of this country's largest cheque-cashing businesses, National Money Mart Co.,
charges a 2.99-per-cent fee plus a $2.99 item fee for cheque cashing, according to its
website. Money Mart is owned by Nasdaq- listed Dollar Financial Corp. of Berwyn,
Penn., and has more than 400 outlets in Canada. It could not be reached for comment

There are other savings with the cards. According to Ms. Schreiber it's been estimated
that the average cost of issuing a cheque (including the salaries and administrative work
involved) is $25 to $60, while the average cost of the prepaid cards is $16.62.

Ian McNeill, Pay Linx founder and chief executive officer, said the firm is also working
with High River, Alta.-based Western Financial Group on corporate programs, and will
be announcing a relationship with another bank shortly.

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