Prepaid cards are attracting a broader audience than many industry observers realize. Research from TD Bank found that a significant share of young adults have used prepaid cards in recent years, with adoption extending well beyond lower-income consumers. As younger generations increasingly seek flexible payment options that complement traditional banking services, prepaid cards continue to gain traction as both a budgeting tool and an alternative payment method.
A survey from TD Bank has found that a third of adults between the ages of 18 and 34 have used prepaid cards in the past three years.
Use of prepaid cards was more common among people with higher incomes, the study found. About 40 percent of the people who said they’d used the cards made between $50,000 and $100,000 and 21 percent made more than $100,000. “There is a misperception about how the cards are being used,” said Tami Farrow, a senior vice president with TD Bank, which released a prepaid card last month
Mercator Advisory Group’s own consumer research has found similar trends. The CustomerMonitor Survey Series found that more than two-thirds of adults between the ages of 18 and 34 said that they has bouts prepaid cards in 2014, which was up significantly from the previous year.
Young people see prepaid both as an alternative and complement to traditional bank accounts. Providers should pay attention to this segment and think about the attributes that can both win these customers — such as offering mobile apps — and keep them for the long term – such as offering the opportunity to move to other financial products.
The growing popularity of prepaid cards among younger and higher-income consumers highlights the evolving role these products play in personal finance. For issuers and providers, success will depend on delivering features that resonate with digitally savvy users, including mobile apps, convenient account management, and pathways to additional financial products. As prepaid cards become more deeply integrated into consumers’ financial lives, providers have an opportunity to build lasting relationships with this important demographic.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
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