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Prepaid card industry faces obstacles, opportunities

Sep 13, 2012 Sean Albert

Among the many different alternative financial services in the marketplace today, prepaid cards are currently among the most popular with U.S. consumers. Because of the low risk and high convenience of these cards, their applications continue to increase, while more providers are entering the distribution game. Today's THV recently explained why prepaid cards are becoming so popular, such as the fact that they are not connected to bank accounts or traditional lines of credit. The source asserts that the most common users of these cards are those who do not have any type of bank account, as well as those who do not have good credit. According to the news provider, some new deployment methods include having a direct deposit from payroll going to a prepaid card instead of a traditional checking account. However, Today's THV stresses that there are still obstacles standing in the way of the industry's success, such as monthly fees and a lack of ability to improve credit scores. CardHub reports that prepaid cards will continue to grow at a rapid rate because of legislation increasing the cost of debit and credit card swipe fees for financial institutions. The firm cited a 20 percent increase in prepaid card transactions between 2006 and 2009, according to the Federal Reserve, which is also around the time that federal legislators began pushing new regulations.