Feb 11, 2013 Sean Albert
Following the financial crisis and the 'Too Big To Fail' sentiment, more households became increasingly distrustful of traditional banking services, leading to an increase in unbanked and underbanked adults in the United States. As a result, alternative financial services and prepaid cards have become more commonly preferred methods of cashless transactions among a variety of demographics.
Several reports indicate that prepaid cards are still the most effective method to reach unbanked and underbanked individuals, largely because of the increased transparency in the industry. As demand continues to rise for these products, vendors should consider cultivating the most unique and preferable terms of agreement to cash in on prepaid card popularity.
Hidden bank fees remain a problem
The Huffington Post recently reported that a growing number of households believe that hidden bank fees continue to rip them off, even to the point of being potentially illegal. Transparency has been an issue in the banking sector for decades, and as younger generations demand clearer disclosures regarding fees and penalties, this has served a crushing blow to financial institutions in the United States.
According to the news provider, bank revenues from overdraft fees alone increased from $30.8 billion in 2011 to $31.5 billion last year, illustrating just how much financial institutions take advantage of patrons. Alternative financial services, such as short-term lending, have experienced increased demand as a result of more households shying away from traditional banking services.
The source asserted that even overdraft coverage can result in hidden fees being levied, and that this further strengthens a common distrust in banks.
"Many people do not like banks because they are tired of being charged fees that were explained in small print that no one reads," Wharton School of Management professor Keith Weigelt told The Huffington Post. "They feel banks rip them off."
Prepaid cards a way to circumvent the system
The prepaid card industry has been especially popular with unbanked and underbanked households, which are believed to represent more than a quarter of the total population of adults living in the nation. Further, these products have cultivated a strong following from younger generations, who are now beginning to make up the majority of the consumer population.
Businesses should consider establishing strategies that lead to the most transparent, unique and preferable prepaid card products. These initiatives can help cultivate stronger followings among the nation's unbanked, underbanked and young demographics, leading to higher revenues.