Jan 18, 2013 Dave King
As the U.S. economy continues to rebound from the doldrums of the Great Recession, businesses and financial institutions are turning to new methods of driving profits. Consumer spending appears to be rebounding, and companies that offer alternative financial services and electronic payments can expect to capture stronger revenues going into 2013.
Now, prepaid cards are beginning to be the payment method of choice among consumers, as this product continues to become more popular with the underbanked and unbanked populations. Some providers of these products have shifted focuses to capture more sales by starting unique marketing strategies and offering customers the best deals available on the market.
Bieber goes prepaid
Bloomberg recently reported that Justin Bieber, a popular pop musician, has entered the prepaid card game as the new pitchman of a niche market leader. According to the news provider, these smaller prepaid card businesses - such as Bieber's company - are beginning to compete with larger financial institutions such as American Express and JPMorgan Chase.
The source asserted that niche prepaid card providers have the unique opportunity to capture more targeted followings, including those in the underbanked and unbanked populations. As the market for these products continues to heat up and become more crowded, many consumers will look for the companies that are best suited to their specific needs.
While larger financial institutions will likely garner higher overall revenues from the prepaid card market, Bloomberg explained that it will be more difficult to compete in niche populations, especially as many unbanked individuals prefer prepaid to get away from traditional banking options.
"The market for prepaid debit cards and payroll card products continues to grow at lightning speed, with new products racing to compete with mainstream consumer services like checking accounts," Aite Group analyst Madeline Aufseeser told the news provider.
The analyst added that prepaid card marketing strategies might begin to look more like traditional credit and debit card commercials, while more celebrities will continue to enter the highly profitable industry. Further, Bloomberg explained that Aufseeser predicted both small and major providers of the services might begin to take on joint ventures, looking to optimize their marketing and customer service processes for the increasingly competitive industry.
BillMyParents makes a splash
CNNMoney recently explained that the company Bieber has become the face of, BillMyParents, has taken on a strategy used by many other prepaid card providers in recent years - using household names to raise the comfort level of consumers. According to the news provider, other celebrities who have already entered the marketing strategies of prepaid card vendors include Magic Johnson, Russell Simmons and the Kardashians.
The source cited comments from the CEO of BillMyParents, who explained that his company has targeted parents for their marketing strategy, and believes prepaid cards can be just what the average adult needs to keep their families' finances in check. To back its commitment, the CEO said that Bieber will be in a group of videos that explain financial literacy to younger individuals.
Finally, CNNMoney said that monthly fees on prepaid cards might drop substantially in the coming year - a product of heightened competition. While the terms of agreement for these products are already becoming more preferable among consumers, the average cost will likely begin to be much more savory for the average individual.
Businesses should consider offering these types of products this year, as more reports indicate prepaid cards will take on a higher market share of the plastic card industry. While credit and debit cards will likely be around for years to come, prepaid will be a true revenue booster for companies of all sizes.