Sep 30, 2013 Dave King
The economic recession led to one of the more massive shifts away from traditional banking services and toward alternative options, especially as more households lost trust in the nation's financial institutions. Now, amid broad economic growth that has become more consistent over the past several months, alternative financial products continue to make headway in a variety of markets.
Prepaid cards have likely been the most popular options among unbanked and underbanked households, and have even started to become popular among employers who are looking for unique methods of managing payroll or expense reports. However, the prepaid market has appeared to come under some fire in the past several months, especially from champions of traditional banking services.
However, advocates have noted the positive economic impact that has come with the prepaid card industry, with groups of young consumers and emerging markets using the tools instead of cash.
American Banker recently reported that the vilification of the prepaid card market might be doing consumers a disservice, and that the mass media has been among the biggest culprits of the scrutiny. Prepaid cards have been shown to help teenagers learn fiscal responsibility with little to no risk, bring unbanked and underbanked populations into the financial system and create channels for further data analysis related to consumer preferences.
Still, media outlets and traditional banks continue to assault the industry, and it seems as though the government even wants a piece of the action, weighing decisions to implement new fees on the cards. According to the news provider, many prepaid card options are far more competitively priced than debt card accounts and come with fewer fees and hidden costs when compared with credit cards.
Additionally, prepaid vendors are finding ways to separate the products from traditional options through unique and engaging marketing programs. For example, many prepaid cards are now gamified, meaning the user simultaneously uses the products for payments and entertainment, with some teaming with popular video game studios or movie producers.
The source explained that the most common scrutiny of the industry has targeted the use of prepaid cards for payroll, as many of those in the mass media have stated that this process is an attempt to take money out of the hands of employees. However, American Banker asserted that prepaid cards do not take away from a staff member's salary.
Get in the game
Alternative financial services providers, retailers and a variety of other organizations can benefit from offering prepaid card products to new and prospective clients. The popularity of these products continues to be on an upward trend, while more households are now considered either unbanked or underbanked today than ever before.
Since a growing range of demographics and markets prefer prepaid, vendors should focus on developing more targeted programs that carve out a niche in the sector. Gamified prepaid cards, as well as those with no or minimal fees, will likely be successful in the coming years.