Wild cards: entrepreneur banks on business serving people who don't bank.

IN 1999, Steven Streit was vice president of programming at L.A. radio station KBIG-FM (104.3) when Clear Channel

Communications Inc. bought his employer, AMFM Inc., for $23.8 billion and cashed him out, along with 15 other executives at the station.

Streit, a former disc jockey and one time fill-in host for Casey Kasem on "American Top 40," suddenly found himself out of a job--but with a few million dollars in the bank.

So he did what most out-of-work executives did during the dotcom craze: He became a consultant to Internet start-ups. That's when he came up with his idea for a new company.

"Many of my clients were saying they couldn't make any money off the Internet because people were afraid to use their credit cards," Streit said. "I found that there are a lot of people out there--waitresses, newspaper delivery people, mailroom workers--who are making a living, but they can't get a credit card because they don't have a bank account."

Streit's company, Next Estate Communications Inc., is one of several around the country that sell prepaid cards to the 30 million people who otherwise can't get credit.

Bought in denominations ranging from $20 to $400, Streit's prepaid cards are issued by Mastercard and Visa through Columbus Bank & Trust Co. There is a one-time $9.95 processing fee, in addition to the amount placed on the card. Retailers typically keep half of the service fee, and 40 percent of the $4.95 fee to reload money onto a card. (A cardholder can reload at any of the 35,000 retail stores that are members of Next Estate's Green Dot Financial Network.)

Tom Miezejeski, vice president of research at Pelorus Group, a credit card marketing firm in Raritan N.J., said Next Estate's prepaid credit cards represent a major change for the banking industry, which has traditionally shunned consumers with little or no credit.

The pre-paid credit approach, he noted, offers a cheap alternative to the $35 fees charged by banks each time someone bounces a check. "This is an ideal product for people who have trouble managing their money," he said.

Next Estate's prepaid cards are available at 35,000 locations that include Rite Aid Corp., CVS Corp., RadioShaek Corp. and Safeway Inc. Getting merchants to sign up wasn't easy, especially at first. "A lot of these grocery and drug stores didn't think the product would sell," he said. "They didn't understand why someone would need this product, so there was some initial reluctance to sell it."

'Last resort product'

Consumer groups still seem unenthused. Fritz Elmendorf, a spokesman for the Consumer Bankers Association, a consumer watchdog group, describes pre-paid credit cards as a "last resort product," and as a result, subject to abuse. "Whenever you're dealing with low-income people," he said, "they're generally less sophisticated and don't have the ability to shop around."

One area of concern, according to Susan Grant, vice president for public policy at the National Consumers League, is the extra charges, such as for re-loading money and even getting a balance (a fee Streit says he doesn't charge). "Consumers really need to look at the terms to understand what the charges are," she said.

Streit received first-round seed money from Tech Coast Angels, the Southern California investor group. Synovus Financial Corp., parent of Columbus Bank & Trust, helped provide the second round and the third came from Michael Moritz at Sequoia Capital, whose early investments included Yahoo Inc., Google Inc. and eBay's PayPal. In all, Next Estate has raised more than $10 million in venture funding.

There is plenty of competition. Visa, Mastercard and a host of financial services companies offer their own prepaid credit cards that are typically linked to a checking account, but their costs and fees tend to be higher. A Eufora Prepaid Mastercard charges consumers $6.65 per month and a $1.50 withdrawal fee. PBG Prepaid Mastercard costs $12.95 per month plus a one-tame $129.95 processing fee.

In addition, CoinStar Inc., based in Bellevue, Wash., operates coin machines in supermarkets that also provide prepaid card services, and Wildcard Systems Inc., in Sunrise, Fla., creates computerized platforms that encode the cards.

Streit said he isn't too concerned about the players. "We have very few competitors," he said, adding that "persistence, a compelling pitch and finding the right sponsors," are the key ingredients to the company's success.

New Estate Communications Inc.

Year Founded: 1999

Core Business: Prepaid Visa and Mastercard debit cards

Gross retail sales 2003 *: $170 million

Gross retail sales 2004 *: $400 million

Employees in 2004: 120

Employees in 2005: 260

Driving Force: To be the bank of the "unbanked" and financially underserved

Goal: To make money, not go broke, and support his wife and six kids

* New Estate only receives a portion of this.