In the past two weeks the U.S. Treasuryannounced that it is launching a prepaid card in conjunction withGreen Dot Corp. to test providing tax returns on prepaid cards, andnow AccountNow has announced that it has a partnership withezTaxReturn.com that will allow consumers to file their returnsonline and receive any refund they receive on an AccountNowcard.
These two companies are following in the wake of a variety of othercompanies who have been offering this service for years. Taxpreparers Jackson Hewitt and H & R Block have both offeredprepaid cards for tax returns and refund anticipation loans totheir customers for years. Nonprofits, such as The Center forEconomic Progress (which is based in Illinois), have been workingto help low-income filers receive their tax returns and claim theearned income tax credit. In 2009, the Center served more than30,000 families and helped 1,500 open no-cost bank and credit unionaccounts, obtain prepaid cards, buy savings bonds, or pay downdebt. These are the same customers that all the tax refund prepaidcard programs claim they want to serve.
The question, is, when will the market become saturated? Have wealready reached the point where the companies in the market aresimply trading customers based on the relative convenience of theirservices? Is there new ground to be broken here?
Perhaps one method for companies to compete is to reposition thecards as something other than just a product for theunbanked/underserved. In thinking about this market, evenunderserved customers frequently have bank accounts where they canreceive direct deposits. If they compare that direct deposit to acard where they must pay a fee to access the funds, then they arelikely to skip the card, unless they think they have no otherchoice.
As Mercator’s Customer Monitor Research has shown, many consumersuse prepaid as a budgeting tool. Combine this with the tendency ofconsumers to treat tax refunds like a windfall, and an opportunityopens up to turn a tax-refund card into a ‘realize your dreams’card that helps the consumer budget for a specific goal. Buildingon this idea with merchant funded discounts, and an ability to addfunds after the tax refund is deposited, the prepaid card couldbecome a new form of savings as well as a spending tool thatencourages a consumer to hold onto and use a card long after thetax refund has been claimed.