HOW IS THE BUSINESS OF CONSORTEUM SUB ORGANIZED?
The following comments apply to our business model which includes our operations in Consorteum Sub, and My Golf Rewards Canada Ltd. We own 75% of My Golf Rewards Inc. We intend to delay the launch of our golf rewards program until such time as the overall financial health of the golf industry supports our marketing and sales.
The majority of our initiatives to date use the `Prepaid Card’ as the cornerstone. A Prepaid Card is similar to a traditional credit card except it is pre-loaded with funds belonging to the cardholder, which he can then use wherever the payment card is accepted, including on the internet and abroad. There is usually no credit involved since the only money available to spend is the money the cardholder, or another source on instruction from the cardholder, such as an employer or a governmental agency, deposits to the card. However, with the acquisition of Tarsin, we are now positioned to recast our prepaid initiatives with a customized mobile application that can provide new financial transactional services to our targeted customers. We believe that our new capabilities will help us differentiate our product offerings.
The Prepaid Card industry allows its customers to gain the desired convenience they may not otherwise be afforded where day to day banking needs are concerned. As a system integrator, we have the ability to leverage our relationships with multiple suppliers in order to address the specific requirements of these day to day banking needs. We will initially target two key markets and will develop and implement financial services, stored value/prepaid cards, payment, and transaction processing solutions for these key areas:
1.The Unbanked/Underbanked
2.Payroll /Benefit
1.THE UNBANKED/UNDERBANKED
The unbanked/underbanked population includes individuals who receive government benefits, benefits payments, payroll checks, and other types of payments, but currently have minimal or no banking relationship.
Traditionally, banks have not focused on the unbanked/underbanked customer base due to increased costs and risks. It is very expensive to service customers via a branch teller, especially when that customer is carrying a zero balance. Banks charge an average of $8 - $15 per month for a zero balance checking account, an obvious deterrent for those who more often than not would carry a zero balance. In addition, the unbanked/underbanked usually do not qualify for credit cards and mortgages so banks have little opportunity to turn them into profitable customers.
Due to increased credit requirements and security measures at banks, often the only alternative for the unbanked/underbanked is to use expensive check cashing outlets whose fees average 2% - 5% to cash a single paycheck. Many immigrant workers transfer funds each pay period to support relatives in foreign countries via check cashing outlets or wire transfers. Fees can amount to $60 per transfer, another major obstacle for the unbanked.
Two-thirds of existing check cashing customers (the ‘underbanked’) have bank accounts but seek more convenient financial services. The remaining customers (the ‘unbanked’) have been ignored by mainstream financial institutions and seek alternatives to provide them with basic financial services.
One potential market for our services in this area is the growing Hispanic population in the United States. According to the July 1, 2008 U.S. Census statistics, approximately 46.9 million people, which represents approximately 15% of the total United States population of 307 million, are Hispanic, making them the country’s largest minority group. Approximately 73.7% of full time, year round Hispanic workers earn less than $35,000 per year. This is usually an indicator for consumers with little or no banking relationship who may rely on alternative providers for their financial service needs. Approximately sixty-seven percent of Hispanics in the U.S. are originally from Mexico, with the second largest group (14.3%) originating from Central and South America. In 2008, over $67.5 billion was transferred from the U.S. to Latin America and the Caribbean, and that same year, $25.1 billion went to Mexico alone.
The underbanked represent a new market for our mobile publishing. The penetration of smartphone technology allows us to develop banking applications that can reach the underbanked with new services that can be tied to their prepaid debit cards and managed from their handsets.
2.PAYROLL /BENEFIT/MOBILE DELIVERY
Debit and Credit is overtaking cash in transaction volume, generating large volumes of transaction fees, allowing branded, prepaid Consumer Financial Services such as payroll and benefits cards to be successful. It is estimated that in 2006 there were 7 million payroll cards in circulation in the United States. The number of United States payroll cards is expected to increase to 17.5 million in 2010. Research done by the Aite Group projects spending through use of payroll cards will soar to $27.1 billion by 2009. Payroll and benefits cards provide employees and benefits recipients (many of whom are ‘unbanked’ or ‘underbanked’) with immediate access to their payroll or benefits payments. Cardholders can use their card at an ATM (Automatic Teller Machine), pay for purchases at the point-of-sale or pay bills online. Payroll and benefits cards are welcome everywhere credit cards are accepted worldwide, including Internet and mail order/telephone order (MOTO) merchants. Cardholders receive monthly statements and can obtain account information online, at ATMs, or by calling a toll-free number for customer service.
Upon enrolment into the payroll or benefits program, the participant will receive a personalized, re-loadable prepaid payroll or benefits card. Each pay period, the participant’s funds are automatically deposited into their individual card account by their program administrator. Cardholders use their cards to obtain cash and pay for purchases as they would with a traditional credit card. Corporate employers can offer the payroll cards to any or all of their employees.
Unbanked consumers are the primary target audience, particularly part-time and temporary employees and employees without checking accounts, those who do not wish to use their checking accounts for direct deposit, and consumers who receive recurring benefits payments. Convenience-minded employees, with or without checking accounts, who elect to have a portion of their paycheck deposited onto a payroll card for budgeting purposes are also targets.
