Prepaid card usage continues to evolve as consumers find new ways to incorporate prepaid products into their everyday financial lives. New card types, mobile apps, improved disclosures, and specialized products have expanded the potential applications for prepaid cards while making consumers more comfortable using them for a wider range of transactions.
However, many of these behaviors build on established prepaid card usage rather than representing entirely new trends. Consumers have long used prepaid cards for budgeting, bill payments, and managing specific spending needs. By examining how and where cardholders actually use prepaid products, program managers can uncover opportunities to develop new products and create more targeted marketing strategies.
Recently, I had the opportunity to be on a prepaid marketing panel at SourceMedia’s ATM, Debit & Prepaid show in Phoenix, Ariz. One of the questions put to the panel was “Are you seeing people use prepaid differently than two years ago?”
To provide a little context for the answer, the panel was moderated by Phil Valvardi, the head of prepaid processing at Fiserv, and my fellow panelists were Sarah Hamel, first vice president in card services at MB Financial Bank in Chicago, and Rob Levy, manager of insights and analytics from the Center for Financial Services innovation. MB Financial recently has launched a prepaid card that it is marketing in its branches both to traditional customers and those outside of the banking mainstream. CFSI has been doing research and investing on financial products to help low-income people since 2002.
Sarah and Rob both answered yes, they are seeing prepaid used in new ways compared with two years ago. They both noted the growth in the variety of cards, the new use cases that cards are marketed for, the development of mobile apps, and better disclosure, which makes cardholders more confident in using their cards.
While all of these developments have opened new avenues for prepaid cards, that is not the whole story. In many ways, people are using prepaid cards in the same ways that they always have, but they are using new cards to do it. Mercator Advisory Group’s CustomerMonitor Survey Series has found, over the course of multiple surveys, between 15 and 20 percent of the population use some form of prepaid card for budgeting. This includes both open-loop and closed-loop cards.
Additionally, Mercator has heard from program managers and other industry participants that people have bought open-loop gift cards for things like making online bill payments. This led to the development of specialized cards for that purpose. So, consumers are finding new uses for prepaid cards all the time. Program Managers and others in the prepaid industry should pay attention to where their cards are being used and for what. The data may provide a new product development or marketing opportunity.
The evolution of prepaid card usage demonstrates how consumer behavior can help shape product development. While technology and new card programs have created additional possibilities, consumers themselves frequently identify useful applications for prepaid cards before providers formally develop products around those needs.
For prepaid program managers, monitoring transaction patterns and emerging use cases can provide valuable insight into unmet consumer demand. Understanding why consumers choose prepaid cards for budgeting, bill payments, and other financial activities can help providers refine existing offerings and identify opportunities for new prepaid products that better reflect how cardholders actually manage their money.
