CardHub CEO Odysseas Papadimitriou announces his expectation that prepaid cards will be the bank replacement product for the unbanked and underserved, as has been written about in other articles and by Mercator Advisory Group in Prepaid Financial Services: The Best Bet For Financial Inclusion (Unless Derailed By Regulation):
“ ‘Prepaid cards were excluded from the Durbin Amendment so that they are still subject to the interchange fee that existed prior to the cap,’ Papadimitriou says. As we have previously reported, prepaid cards work almost identically to debit cards but with one major exception. Since the money isn’t connected to a checking account, cardholders can’t cash paper checks. Prior to financial reforms, this payment option was largely marketed to low-income, cash-strapped or non-creditworthy people who couldn’t qualify for a traditional checking account.
Incidentally, this is what led to prepaid cards being excluded from the Durbin Amendment, as legislators hoped to spare low-income consumers from paying extra on the already fee-heavy prepaid cards. Some industry experts speculated that financial institutions would add new fees to the prepaid cards anyway as a way to recoup the swipe fees lost to the new cap on regular debit card transactions, but Papadimitrou believes that instead, banks will capitalize on the loophole in the legislation and try to attract other consumers to prepaid payment methods. ”
Perhaps more interesting is Papadimitriou’s thoughts on the marketing tactics of the future:
“ ‘We’re going to see a new breed of prepaid card hit the marketplace,’ he says, citing that these cards will have little to no fees and rewards programs attached to them. ‘Just like with credit cards, you will have prepaid cards that are targeted to consumers with bad credit and prepaid cards that are targeted to those with good credit.’ ”
The full story is here: