|Prepaid cards appeal to underbanked and Gen Y consumers|
Prepaid cards are particularly attractive to two segments—young consumers (notably Gen Y) and underbanked consumers (those who are not actively engaged in the use of traditional banking products) who want to build financial independence. Prepaid cards are held by one in six underbanked consumers and young consumers, respectively, according to research by Javelin Strategy & Research
The use of prepaid cards has increased, while ownership of other traditional financial products—including checking accounts, savings accounts, credit cards, and debit cards—has noticeably decreased. The growth of prepaid products has been propelled by a flurry of innovative features such as advanced online and mobile account management, rewards programs, and credit history development. Financial institutions can leverage prepaid cards to establish relationships with young and underbanked consumers, transforming them into loyal customers who can become more profitable as they engage with additional banking products such as checking accounts, credit cards, and loans.
“Today’s prepaid features match and even surpass the features of many checking accounts, says Beth Robertson, director of Payments Research at Javelin. “Functionality that can enable consumers to manage their account using their mobile device or social media account, establish and build a history that can be used for credit-issuing, or enable person-to-person transfers provide high value to underserved consumers.”
The growth of the ecommerce and mobile markets has added to the value proposition of prepaid for underserved consumer segments. The online environment is a critical driver for underbanked consumers, as nearly three-fifths of this group regularly uses prepaid cards for online purchases. New mobile services are also generating high value for young and underbanked prepaid users who commonly have access to mobile devices, including smartphones.
“Mobile alerts, mobile rewards delivered via geolocation services, and mobile account management are some of the many features now incorporated into prepaid products,” says Jim Van Dyke, president, Javelin. “Providers offering integrated mobile tools are well positioned to deliver high value to young and underbanked prepaid card owners.”
Other findings of the report include:
• Prepaid cards are more commonly owned by underbanked and young consumers (18% respectively) versus a tenth of all consumers.
• 56% of underbanked consumers report that they used their prepaid card for an online purchase, compared to 46% of all prepaid owners.
• Underbanked consumers report higher average prepaid reload amounts than do other consumers.
• Rewards drive payment use: 53% of Gen Y and 47% of underbanked consumers report that rewards would encourage their adoption and use of prepaid cards.
[This article was posted on April 24, 2012, on the website of ABA Banking Journal, www.ababj.com.]
Tony Rodriguez said:
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