ocusing on the "P's" in the prepaid market, EWI Holdings Inc., a privately held and institutionally backed company, provides payment processing services for prepaid transactions at the point of sale through the use of a personal identification number (PIN).

"We provide a gateway into the world of prepaid products and services," said Patrick Hazel, EWI Chief Executive Officer.

"We operate a processing platform, just like any merchant processor. We also organize and aggregate the various prepaid products out there such as for wireless, long distance, digital content, local phone service as well as gift and stored-value programs."

EWI is based in San Diego, Calif. and has an office in Mexico City.

Why Mexico? "In Mexico, 90% of the people who have a cell phone prepay for their airtime," Hazel said. "In the United States, it's about 10%, although this number is growing rapidly-about 40% annually."

Prepaid wireless is the fastest growing segment in wireless, and one of the fastest growing markets in the United States. Research and consulting firm The Yankee Group predicts that users of prepaid services will increase by nearly 70% to 24.8 million by 2007.

In the United States, prepaid is a $10 billion-a-year market; Hazel said he believes the rapid growth is because of several reasons. For one thing, many U.S. consumers do not meet the credit qualifications for opening a regular, "post paid" wireless account.

Others like knowing exactly what they're spending on their wireless service every month, instead of potentially receiving surprises on their bils from roaming charges or other fees.

Prepaid is also an ideal solution for many parents who have teenagers with their own cell phones. In fact, the youth segment is the fastest growing demographic in prepaid.

EWI Chairman Miles Paschini founded EWI in 1999. Paschini is the inventor and author of EWI's patented prepaid PIN processing platform, which is called Paygo.

In the increasingly competitive world of prepaid products, EWI closely guards this proprietary technology. The company filed for a patent in July 2000 and was granted Patent No. 6526130 in February 2003 for the processing of prepaid transactions through real time PIN delivery solutions.

Paygo is a digital technology that allows retailers to distribute prepaid products in real time from their point-of-sale systems. A PIN code is attached to a monetary unit of value for a product or service such as $50 worth of Verizon airtime. Paygo also supports other prepaid delivery methods such as point-of-sale activation (POSA), top-up and stored value.

The solution delivers prepaid products to consumers using various applications that reside on POS terminals, ATMs, kiosks or even a Web browser.

"When a consumer walks into a merchant and wants to buy $50 worth of prepaid wireless airtime, the merchant can go to our network and pull it down in real time," Hazel said.

"And it's delivered over their credit card terminal or through an online solution. No plastic prepaid card inventory is required."

The key is no longer needing the card inventory. The cards arrived at the merchant location already "activated," and then they were at risk from theft, whether from being shoplifted or from employee theft, or "shrinkage."

Using EWI's system, the PIN and all the other information needed for activation that previously appeared on the cards isn't available until the merchant requests it. Once this is done, the information is printed out on the receipt from the POS system.

"In the old days, the merchant had to buy the cards and pay for them in advance; they had to stock them and carry them as inventory," Hazel said. "There was also the whole hassle of making sure they had the right denominations from the right providers.

"Now, merchants using our system can have any product they want, 24/7, in any denomination they want and on demand. There's no inventory, there's no stocking, there's no allocation, there's no hassle. Whatever product their customers want when they walk in the door, we'll help the merchant deliver it to them."

To deliver its systems at the POS, EWI has partnered with payments companies including National Processing Co., VeriFone Inc., Hypercom Corp., Ingenico, Lipman, Verizon Wireless, T-Mobile, Sprint, AT&T, Cingular, Boost Mobile, TracFone, Alltel and PlayPhone, among many others.

For instance, NPC integrated EWI's technology with NPC's existing POS transaction services. The result is a single solution for credit, debit and prepaid transactions, which NPC offers to more than 700,000 of its merchant customers.

Through partnerships with POS terminal manufacturers, EWI is able to provide merchants with a solution that works with their current POS system and that can be integrated with existing credit and debit card transaction processing.

"In our model, if merchants have a terminal we currently support, then they're ready to go; if they don't, then the addition of prepaid can serve as a great incentive for them to upgrade their terminal," Hazel said.

"We really prefer to work on multi-application terminals like the VeriFone 3750 or the Hypercom T7 arena. But if the terminal doesn't exist in our portfolio, we'll build the application to meet the terminal footprint of the client."

This is where ISOs and merchant level salespeople (MLSs) fit in. Merchants want to offer prepaid products to their customers because they sell.

Among merchant locations, in particular, convenience stores, it's in the top five for profit generators, he said.

Other popular locations include grocery stores, discount drug stores, liquor stores and college bookstores-anywhere there is high consumer foot traffic. And among ISOs/MLSs, all the buzz lately is about providing merchants with the next great value-added solution that can be bundled with credit and debit card processing.

"It's a natural that prepaid should go along with credit and debit services," Hazel said. "It is, after all, just another form of payment."

EWI first reached out to the ISO/MLS sales channel at the Electronic Transactions Association (ETA) Annual Meeting and Expo in spring 2004. "We've been taken aback by ISO interest since then," he said. "Our phone has been ringing off the hook."

In working with this sales channel, EWI pays ISOs/MLSs through a commission structure, and Hazel said the commissions generated can be substantial. ISOs/MLSs can make several entire percentage points of the retail transaction value, and the amount of commission available on a given prepaid transaction is many times that of a typical credit or debit transaction.

EWI offers a turnkey solution to ISOs/MLSs. Its systems operate either side by side or are integrated with their applications. EWI supplies the prepaid product lines and supports the design and implementation of merchandising programs for the sale of prepaid products in the stores. The company also provides ongoing training and support.

"We try to be relatively invisible to the merchant, but highly visible to the ISO on the training and support side," Hazel said.

He also said that merchant processors and ISOs/MLSs who pair their payment services offerings with EWI's prepaid services should be able to sign up more merchant customers, have better merchant retention and boost revenue earned per merchant.

"Salespeople are calling on merchants; salespeople want to increase the products that they offer and then bundle them in the right way," Hazel said.

"So it's a big win for them because they get the additional transaction business, and it's a big win for the retailers, who get a much better solution for offering prepaid.

"[As an ISO or MLS], it makes your value proposition that much stronger. And I think it will also aid in retention of these customers over time because you're giving that much more business to them that is central to their profits."