Jan 18, 2013 Dave King
More consumers are beginning to purchase and use prepaid cards than ever before, and though the product is not exactly new, several economic and political factors are driving the industry toward better performances every month. Businesses should consider offering and accepting these products to boost profits going into the first months of 2013, as many experts believe they will steal market shares from traditional banking services.
The Street recently reported that increased regulations pertaining to credit cards are making prepaid cards more savory for financial institutions, businesses, payment processors and consumers. According to the news provider, the lack of legislation regarding prepaid cards is making the industry much more profitable than its traditional counterparts, while the perks of using these products are beginning to outweigh those of checking accounts.
The source cited research from the Mercator Advisory Group, which found that consumers loaded a total of $57 billion onto prepaid cards in 2011, when the industry began to take off. In 2012, an estimated $82 billion was loaded, representing a $25 billion increase year-over-year, and this level of growth is forecast to continue to rise at an increasingly rapid pace.
The Street said the Mercator Advisory Group expects consumers to load $117 billion onto prepaid cards this year, and then $167 in 2014. The news provider noted that competition in the market is already driving rates and fees down, while regulators such as the Consumer Financial Protection Bureau are beginning to push new legislation for the industry.
Businesses that choose to offer prepaid cards should work to keep rates and fees at a minimum, while maximizing the perks, such as incentives for use and financial guidance. Regulations might begin to standardize the industry, but for the time being, competition is doing its job in keeping options as beneficial for the consumer as possible.