Reforms lead to alternative financial service success
Oct 29, 2012 Sean Albert
In recent months, several experts have asserted that prepaid cards represent the biggest threat to traditional banking methods, as more consumers continue to prefer this form of alternative finance. Businesses that have decided to ride the wave of this popularity are in a good position to capitalize in the coming holiday shopping months, as many consumers intend to purchase and use prepaid cards. Financial institutions have also started to join in and offer prepaid cards, while this is being seen as a particularly advantageous tool on behalf of consumers because of lower fees than checking and savings accounts. Now, competition in the prepaid industry will likely boost popularity while driving down consumer-facing costs. Impact of financial reform on alternative financial services
Following the major overhaul of Wall Street regulations, banks, merchants and payment processors had to scramble to decide the best ways to continue making profits in light of new debit interchange fees. The Motley Fool recently reported that though prepaid cards have been around for decades, these new pieces of legislation ended up being a major hit to traditional banking services. Thus, more businesses and financial institutions looked to alternative financial services as a method of driving sales, with electronic payments and prepaid cards among the most popular and profitable. According to the news provider, now, most financial institutions offer prepaid cards to customers, yet there are no standards in place regarding fees and terms. However, the source noted that this wide range of fees and terms, depending on where a consumer gets the prepaid card from, has increased competition with many businesses offering cards that have almost no additional charges. Further, the Motley Fool explained that these cards have been especially successful in the fight to reach the unbanked and underbanked populations. Driving profits through prepaid cards
Alternative financial services have experienced massive growth in the years following the recession. Consumers are increasingly viewing these as safer alternatives to traditional debit and credit cards, likely because very little information and risk is tied to prepaid cards and other services. Many experts purport that businesses need to keep terms of alternative financial services preferable for the customer, while also maintaining low regular fees and avoiding penalties whenever possible. These methods can help drive adoption and use of prepaid cards and electronic payments.
Following the major overhaul of Wall Street regulations, banks, merchants and payment processors had to scramble to decide the best ways to continue making profits in light of new debit interchange fees. The Motley Fool recently reported that though prepaid cards have been around for decades, these new pieces of legislation ended up being a major hit to traditional banking services. Thus, more businesses and financial institutions looked to alternative financial services as a method of driving sales, with electronic payments and prepaid cards among the most popular and profitable. According to the news provider, now, most financial institutions offer prepaid cards to customers, yet there are no standards in place regarding fees and terms. However, the source noted that this wide range of fees and terms, depending on where a consumer gets the prepaid card from, has increased competition with many businesses offering cards that have almost no additional charges. Further, the Motley Fool explained that these cards have been especially successful in the fight to reach the unbanked and underbanked populations. Driving profits through prepaid cards
Alternative financial services have experienced massive growth in the years following the recession. Consumers are increasingly viewing these as safer alternatives to traditional debit and credit cards, likely because very little information and risk is tied to prepaid cards and other services. Many experts purport that businesses need to keep terms of alternative financial services preferable for the customer, while also maintaining low regular fees and avoiding penalties whenever possible. These methods can help drive adoption and use of prepaid cards and electronic payments.
