Despite being launched as a tool for low-income people without bank accounts, general purpose, reloadable prepaid cards are gaining favor among young, higher income Americans, according to a new study published by the Payments Card Center at the Philadelphia Federal Reserve.
In fact, research fielded in August 2013 by market research firm Phoenix Marketing International (Phoenix) found a strong and growing adoption of GPR among middle- and higher-income and high-net-worth households. Consumer take-up of GPR cards skews heavily to younger consumers, according to the research. Using self-reported information on GPR cardholder transaction and reloading activity, Phoenix identified a “power user” segment of the market composed of households headed by individuals who are both young and have a high income.
The study brings to light the reality that players like American Express and Chase have realized with their prepaid products, namely that prepaid cards can be useful to people across all socioeconomic categories. The Bluebird and Liquid products target people who are looking for budgeting and spending tools, in addition to those who cannot, or choose not to, use a traditional bank account.
Mercator Advisory Group’s research has consistently shown that around 20% of prepaid card users say that they use the cards for budgeting purposes. As the cards become more well-known and more widely available, it is not surprising to see their uptake increase. Once interesting fact to come out of the Fed study is that 90% of prepaid card holders say they have bank accounts. This may lead prepaid providers to calibrate their products a little differently to draw in those customers
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Overview by Ben Jackson, Director, Prepaid Advisory Service