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Prepaid card industry gaining more notoriety

Feb 04, 2013 Dave King

Prepaid card industry gaining more notoriety

The prepaid card industry continues to heat up as more consumers begin to prefer this method of alternative banking than ever before. Though prepaid cards have been around for decades, the financial crisis led to a widespread distrust in the nation's banking system, and the populations of unbanked and underbanked individuals have grown substantially as a result.

Prepaid cards represent a fresh slate to traditional financial institutions, as well as a variety of merchants and other service providers. Thus far, several studies have revealed that more demographics continue to view prepaid cards as the best option for financial services, likely because of the lower volumes of fees and increased opportunities to receive rewards in comparison to credit or debit card accounts.

Celebrities hop on the bandwagon

Bank Credit News recently reported that a variety of celebrities have entered the prepaid card industry rapidly in recent months, as it has become clear that the payment option will continue to grow at an exponential pace in the coming year. According to the news provider, Justin Bieber, Suze Orman, the Kardashian sisters and Russell Simmons are just a few popular names now associated with prepaid card services.

The source explained that some celebrities are joining forces with existing prepaid card service providers, such as Justin Bieber's latest deal with BillMyParents, while others have started to offer their own plastic payment cards. This too is not necessarily a brand new trend, as Hilary Duff was the face of a prepaid card company in 2003.

However, the number of celebrities entering the game is much higher than ever before. Bank Credit News explained that some advocacy groups have voiced concerns about prepaid card players marketing to teens, though this is only a real threat when the provider partakes in either fraudulent or negligent practices. 

Avoiding legislation and driving profits
Prepaid cards are most appealing to many service providers because of the latest federal legislation that covers debit interchange fees. As prepaid cards are not inhibited by these laws, the ability to keep fees low and still drive profits is savory for any financial institution, merchant or alternative finance provider. 

To ensure the most profitable experience with prepaid cards, fees should be as low as possible and fine print should be at a minimum. By being the most transparent and reliable service provider, prepaid card companies can expect to see stronger loyalty, higher revenues and increased engagement among current and prospective customers.