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Prepaid, the Original Fintech Solution

Sarah Grotta by Sarah Grotta
October 1, 2020
in Analysts Coverage, Challenger Banks, Fintech, Prepaid
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Prepaid, the Original Fintech Solution

Prepaid, the Original Fintech Solution

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20 years ago when fintech companies were just called “start-ups,” prepaid card program managers, processors, banks, and others in the payments industry were developing new financial solutions to solve money movement issues for instances when banking accounts were not available or when account details were unknown. 

Prepaid is still here and still playing a vital role in the buzzier era of neo banks, gig economy payments, and the effort to improve financial inclusion. As an article in Forbes points out, prepaid is playing an outsized role in the success of fintech:

For the longest time, saying the word “prepaid” to a financial institution or issuer might have been met with a yawn. Yes, the stepbrother of debit was a legitimate form of payment with plenty of clever applications, but why bother when there were so many other more lucrative lines of business.

Well, as it turns out, prepaid has found a new momentum. I’ve found, based on my company’s experience creating prepaid offerings, that this is in large part due to some inherent properties that make prepaid a good option for many of today’s most pressing use cases, such as on-demand delivery, gig work, digital subscriptions and other forms of mobile and digital commerce.

This article looks at prepaid’s role as a gateway account for digital inclusion, the role it has played during the pandemic, and the use of prepaid as a path to account-based debit. It concludes:

It’s time to re-evaluate and reconsider prepaid’s relevance and utility through new lenses, taking into account the latest mobile-enabled issuing models, use cases and players. Besides, everyone loves a comeback story.

Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group

Tags: Financial InclusionFintechPrepaid
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