Being Charitable while Staying Profitable: The HaloCard Approach

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Business and philanthropy rarely work well in conjunction with one another but a new startup presents an innovative strategy that shows promise of successfully merging these two institutions. Introducing… HaloCard, a startup that offers a bank-issued credit card that allows holders to donate 1% of their transactions to their favorite charities. The card benefits both the holder and the charities involved. HaloCard holders receive a tax deduction while charities earn 100 basis points, as opposed to the usual 30 or 40 earned through most affiliate relationships with credit card companies. As for the community banks issuing HaloCards, their interchange income from the cards is lower than usual – about half the amount of regular cards – but HaloCard users are expected to be high-spenders and low-risk customers, according to the startup’s founders.

If HaloCard is to succeed financially, the startup must overcome certain looming obstacles. One major concern is the company’s rate of growth. Founder Nick Lepetsos estimates that the startup can manage a couple thousand cardholders during its opening months but anything greater than that could lead to turmoil. Another challenge will be generating profit. Currently, the startup aims to earn its income through taking a share of the 50-75 basis points on HaloCard transactions. Co-founder Stanley Goldstein admits “It’s a lousy business model,” as this approach will not lead to significant profit unless many transactions are made. Nevertheless, the startup’s good-willed mission seems likely to gain support from philanthropic individuals and charities. Will their support be enough to keep HaloCard’s head above water? What do you think?

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