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Prepaid cards become more savory for the average citizen

Oct 29, 2012 Sean Albert

Alternative financial services have become increasingly commonplace throughout the years following the Great Recession, directly correlating with higher populations of unbanked and underbanked households. Banks and businesses have begun adapting their services to reach these individuals, encouraging the adoption of tools like prepaid cards and electronic payments. Many reports have indicated that underbanked and unbanked populations are more apt to use prepaid cards than traditional banking accounts and credit lines. Other electronic payments, including those made through online and mobile platforms, have also increased in popularity along with higher rates of smartphone and tablet adoption. Prepaid cards becoming more preferable
Business Insider recently reported that the various new prepaid cards being deployed by financial institutions and businesses have become increasingly attractive to consumers. This is a direct result of lower fees for transactions, annual accounts and more, as prepaid cards commonly have lower rates than debit and credit card accounts. The news provider explained that these products are also seen as a safer alternative to traditional banking, largely because they are not directly linked to personal information that could be used in an identity theft scheme. Further, budgeting with prepaid cards is much lower risk than debit and credit accounts, with which consumers can easily take out more funds than they can afford. "Prepaid cards have been growing in popularity for some time now," credit expert with Card Hub, Odysseas Papadimitrious, told Business Insider. "They were the fastest-growing form of electronic payment from 2006 to 2009, according to the Federal Reserve, however, it wasn't until the Durbin Amendment was passed, costing banks $8.4 billion in revenue annually, that they really took off." Finally, Business Insider noted that many debit accounts have experienced decreasing rewards programs, whereas prepaid cards are more commonly tied to loyalty and gift programs with the businesses that offer and accept them. FDIC assesses alternative finance
The Federal Insurance Deposit Corporation has been keeping a close eye on the underbanked population, as well as the use of alternative financial services, in recent months. The FDIC estimates that the number of underbanked households has gradually increased each year, with more than 15 million families currently operating without a traditional bank account. Further, the FDIC puts the annual volume of alternative financial service transactions at $320 billion currently, with prepaid cards accounting for just shy of $40 billion of the total.