The malleable nature of prepaid technology allows fintechs a blank canvas to use prepaid as a building block for many services. The Financial Brand’s Bryan Yurcan reports on how banks and credit unions can use the same blueprint to expand their offer:
“’Prepaid today is more versatile and prevalent than ever before,” says Francisco Alvarez-Evangelista, an advisor in the retail banking and payments practice at Aite-Novarica group in an interview with The Financial Brand. “Yet it is often this unassuming player that gets little attention for its role in today’s top trends.’
Prepaid is still largely looked at as a high risk, low reward market by many traditional financial institutions, says Alvarez-Evangelista, yet it plays a large role in how many fintechs and digital challenger banks have rolled out new products.”
Yurcan specifically calls out Buy Now, Pay Later as a prime example of using prepaid as the back-end platform to support BNPL transactions and provide instant settlement.
“Overall, it is a “far more efficient way” to conduct such transactions, as opposed to using other settlement processes on the back end, such as sending an ACH, he states. Everything is settled immediately.”
Financial institutions can follow similar paths utilizing prepaid rails to ramp up quickly in spaces like virtual cards and digital wallets with very low barriers to entry and with lower cost structures needed. Consumers associate these activities with higher tech offerings as opposed to the more common association of prepaid with GPR cards and gift cards.
Overview by Jordan Hirschfield, Director of Research at Mercator Advisory Group