Consumer Interest in Prepaid Cards Continues to Grow
Published in CSP Daily News
Prepaid cards are on the upswing for consumers in convenience stores and other channels of retail.
Traditional banking costs and lingering distrust of large financial institutions have led consumers to explore prepaid cards, according to a report from financial-services provider InComm.
At the same time, financial institutions are emphasizing prepaid offerings as regulations are limiting checking account profits.
As consumers turn to alternative cash-management tools, they’re swapping traditional checking accounts for prepaid cards.
According to a Nilson report, the top 50 largest U.S. banks and credit-union issuers of general purchase prepaid cards accounted for $118.09 billion in spending at merchants in 2013, up 6.1% from the previous year.
Meanwhile, Mercator Advisory Group said the amount of money loaded on general-purpose reloadable prepaid debit cards almost tripled from 2008 to 2013, rising to $76.7 billion. Mercator predicts that number will rise to $168.4 billion by 2015.
More indicators that deposit accounts are losing sway and several emerging services driving the trend:
- Once geared toward the under-banked, prepaid cards are replacing demand-deposit accounts for many consumers.
- The Federal Reserve's 2013 payment study showed prepaid-card transactions growing at 36.1% compound annual growth rate vs. 9.3% and 9% for credit and debit cards, respectively.
- Relatively new services such as direct-deposit and mobile-deposit card loading are expected to further accelerate prepaid card use.
There are four primary usage patterns for prepaid, according to a 2014 report by Alina Comoreanu. They are:
- An alternative to a checking account
- A tool to give your child their allowance
- An alternative check-cashing tool
- Provide access to electronic transactions
Here’s a look at how prepaid cards are being used and by whom.
Source: Aite Group survey of 1,242 U.S. consumers, Q2 2013