In the prepaid card industry, businesses usually stake their claims to particular niche markets, whether it's the unbanked or teenagers. But such a focus can hamper future growth prospects because those markets are finite. The goal of Los Angeles-based program manager Kaiku Finance LLC is therefore to expand the user base for its general purpose reloadable (GPR) prepaid cards by appealing to lifestyle sensibilities rather than targeting particular consumer groups.
"We have basically changed the paradigm from consumer prepaid being the card of last resort, with the stigma of 'if you can't get credit, if you can't get debit, go to a prepaid card,' to basically people making a lifestyle choice to get a prepaid card," said Kaiku Chief Executive Officer Jon Round.
The most prominent example of this strategy is Kaiku's partnership with mobile game publisher Rovio Entertainment Ltd., maker of the popular Angry Birds games. Round said consumers are initially attracted to the Visa Inc.-branded GPR card because it's associated with Angry Birds and the colorful artwork on the cards. "It doesn't look like a traditional boring bankcard," Round said. "They want something that's different."
Another enticement comes in the form of a 10 percent discount for purchases at the Angry Birds online store when consumers sign up for the card. With a reported 263 million active Angry Bird game players as of December 2012, a sizable audience is already built-in for the card.
Round said Rovio chose to partner with Kaiku to venture into the GPR card space because Kaiku's business model dovetails with Rovio's focus on online and smart-phone users. Kaiku sells its GPR cards exclusively online. "We don't do any retail sales at all," Round noted. "That's deliberate on our part. You acquire a much better quality of cardholder through the online channel."
It is not to denigrate people who buy retail GPR cards from big-box stores, such as Wal-Mart Stores Inc. locations, but Round believes consumers more accustomed to shopping online are more discerning, and hence more valuable. He said, "If you walk into a merchant, how do you know on that end rack on that small piece of real estate that you see on a card on a J-hook, that that's the right card for you? You don't."
In contrast, online and mobile users are more likely to comparison shop for financial products. "And that's what we encourage our cardholders to do on our own website," Round said, pointing out Kaiku's comparison tool that allows consumers to judge Kaiku's fee schedule and program details against the terms and conditions of its competitors.
Comparing products leads to better-informed consumers. "They know what to expect," Round said. "They know this isn't a credit card, for instance. They know it's a prepaid card. They know what the fees are. They know what the functionality of it is."
The result is that when consumers choose Kaiku, they do so not to have a "one-and-done" relationship. Round said, "By acquiring a higher quality of cardholder, what we see is over 75 percent of our cards are reloaded, whereas in retail the significant majority are called 'one and dones.' The cards are used once and that's it."
Additionally, over 60 percent of Kaiku cardholders opt to enable direct deposit on the cards, which makes the cards not only de facto payroll cards but top-of-wallet cards as well, according to Round. He said cardholders are using the cards for everyday purchases at such retail environments as grocery stores and gas stations. "That's what we want," he added. "We want to get people who are going to have the card, keep the card for a long time, load it a number of times, use it as their everyday spend card."
Round said Kaiku's user-base age-breakdown reveals that 75 percent of its cardholders are between 22 and 50 years old, with users equally divided in the 22 to 30, 30 to 40 and 40 to 50 age ranges. Kaiku has such a wide demographic by design. "We call it a generation Y-style of communication," Round added. "It's basically marketing and talking to people in a way that doesn't alienate any particular demographic."
Kaiku has found that people are actually using the card to bridge the age gap. "We see adults with families who are getting prepaid cards to use with their elderly parents," Round said. "And we also see families who are using prepaid cards with their students for fiscal responsibility and because it's a better option for them."
As its competitors stick to niche markets, Kaiku is intent on offering cards with wider appeal. "If you offer value for money, if you offer an attractive product, people basically make the choice," Round said. "It's a no-brainer to choose our cards." 
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