Credit card veteran Andy Phillips is going after those who deal in cash but want the benefits of plastic.
Last week, Phillips opened CardFlex Financial Services LLC in Costa Mesa, where he’s chief executive. The company offers prepaid credit cards aimed at what Phillips calls the “underserved,” immigrants and others who don’t have bank accounts or credit.
“This is a niche market of people with financial challenges and immigrants,” he said.
There’s no credit check or checking account needed to get CardFlex’s card. Holders fund the card with cash up front and draw on it as they use the card, similar to a prepaid cell phone.
The card can be used as a debit or credit card.
Prepaid cards are nothing new. Technology that became available this year makes them easier to use. Before, adding cash to a card involved going through banks. That didn’t work well for immigrants and others without bank accounts.
“Soon people will be able to go into places like Wal-Mart and hand over cash to be added to the cards,” Phillips said.
Getting people to use the cards instead of cash is CardFlex’s challenge.
The company plans to offer companion cards that allow holders to add money for other people, Phillips said.
That stands to appeal to people in the U.S. wanting to transfer money to relatives in Mexico or other countries.
Many Mexican immigrants shun bank accounts, in part because of their experiences with banks back home and because some are here illegally.
Regardless of status, immigrants are coveted targets of big banks, which are losing out to the cash economy immigrants have created in Orange County and across the country.
Getting them into the banks isn’t easy. Phillips faces a similar hurdle.
“One of our biggest problems is educating people about this,” he said.
Applications for cards have to undergo screening by the federal Office of Foreign Assets Control to confirm the identification of the applicant, but not necessarily their immigration status.
Still, that could put off migrants who are here illegally.
Bad Credit
People with credit problems likely will be among the earliest users of CardFlex, according to Phillips.
Nationwide, there are about 30 million families and 80 million people who are potential customers, according to Phillips.
CardFlex stands to see $14 a month in revenue for each card issued, he said.
“In 36 months, this could be a $100 million business,” he said.
Phillips has invested $2 million of his own money into the company and is the sole owner.
25 Years
He’s been in the credit card business for 25 years.
Three years ago, Phillips sold Newport Beach-based Payment Resources International Inc. for $50 million to Dallas-based TransFirst Holdings Inc., a processor of credit card transactions. He owned 90% of Payment Resources.
Terms of the sale prevent Phillips from competing with TransFirst. That’s what led him to prepaid cards, he said.
Phillips said he spent nine months putting together CardFlex.
“I could have done this in 60 days, but I wanted to do it right,” he said.
The company works with Palm Desert National Bank in Palm Desert.
