Turning a prepaid card into a charge card

Here is a change we have been working on with a partner that is small in engineering and large in what it does to a business.

They run a prepaid card program. Their customers load money onto a card, then spend it. It works, it is simple, and everybody in that market ships some version of it.

The trouble with prepaid is the loading. A customer has to have the money, decide to move it, and move it before they need it. Every one of those steps is a place the customer does not act, and the card sits in a wallet doing nothing on the exact day it should have been useful.

What changes with a line behind it

Put a credit line underneath and the same card stops being a wallet and starts being a way to pay.

The customer gets a limit, approved once. When they spend, they draw against it. At the end of the cycle they settle. No pre-funding, no float sitting on a card doing nothing, no moment where the card declines because a transfer had not cleared.

The card is identical. The rails are identical. The plastic in the customer's hand is identical. What changed is that the money is available before it is theirs, which is the difference between a card that holds value and a card that extends it.

The mechanics, plainly

The limit is set from the platform's own data. Not an application: the record they already hold of how much a customer spends, how consistently, and how reliably they settle.

Each spend is a draw. Each cycle has a statement, a grace period, and a fixed cost if a balance is carried past it, shown before anyone agrees to anything. Nothing accrues in the background. Clear inside the grace period and the cycle costs nothing.

If the minimum payment is missed, the line suspends itself at finalisation. Nobody has to notice and make a phone call, which is the part that usually goes wrong at scale.

Whose book it is

This is the part people ask about. It can go two ways.

Slate can fund it, carry the risk and do the collecting, and the platform takes a share of the spread.

Or the platform can be lender of record and hold the receivable themselves, with Slate running the engine underneath: the limits, the draws, the cycles, the statements, the collections. That option is shipped and running on a weekly cycle today.

Most partners want the first. Some have a balance sheet and a reason to want the second. Both are real, and the customer experience is the same either way.

Why it is worth doing

A prepaid card earns interchange. A charge card earns interchange on more volume, because customers spend when they need to rather than when they remembered to top up, plus the spread on the balances that get carried.

The customer gets the simpler thing: a card that works when they use it.

If you run a card program, this is a conversation worth having.