PaymentsJournal
No Result
View All Result
SIGN UP
  • Commercial
  • Credit
  • Debit
  • Digital Assets & Crypto
  • Digital Banking
  • Emerging Payments
  • Fraud & Security
  • Merchant
  • Prepaid
PaymentsJournal
  • Commercial
  • Credit
  • Debit
  • Digital Assets & Crypto
  • Digital Banking
  • Emerging Payments
  • Fraud & Security
  • Merchant
  • Prepaid
No Result
View All Result
PaymentsJournal
No Result
View All Result

Reform Of The Prepaid Card: Good Intentions Gone Bad

By Tim Sloane
April 10, 2012
in Mercator Insights
0
0
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

Reinvestment Partners ignores the value ofprepaid debit cards and focuses instead exclusively on cost. Aswith other consumer groups, Adam Rust, Director of Research atReinvestment Partners, has issued a press release and a new report thatpromotes principles that are only valid when it is assumed thatthese cards are comparable to a bank account – but they aren’tbecause prepaid debit cards offer greater liquidity and convenienceand are also available to individuals shunned by traditionalfinancial institutions. Rust is quoted in the press release:

“Until all prepaid cards are safe, affordable,and fully functional,” says Adam Rust, Director of Research atReinvestment Partners, “they will still be a less-than-optimalsubstitute for a regular checking account. The reformed prepaidcard will give consumers the services they need while protectingthem from excessive fees, high-cost credit, and confusingdisclosures.”
What Rust means by “safe, affordable, and fully functional” isconfusing in that Mercator consumer research, as well as researchperformed by others, clearly indicates cardholders are extremelyhappy with the prepaid debit cards they have so these cards appearto be functioning perfectly for those that like them. This shouldcome as no surprise in that funds can be deposited on these cardsand cash withdrawn at far more locations than associated with bankbranches or bank ATMs.

Indeed, research I conducted and published in the report “Graspingthe Benefits of Prepaid: A Battle Plan for Banks” shows that forthree zip codes in the low and moderate income neighborhood ofStockton California, there were more than four Green Dot locationsfor every one Bank of America location, and there wasn’t one creditunion to be found.

Rust also brought up the issue of credit associated with prepaiddebit cards:

No credit: Until recently, one bank offered aline of credit with an APR of more than 120 percent on its prepaidcards. That is not right. The prepaid card should be a safe harborfrom high-cost credit and from any overdraftpenalties.
Rust is willing to eliminate the ability for those with low andmoderate income to get the credit they need because of one solutionthat was, from his perspective, overpriced. I say “from hisperspective,” not because I believe the fees charged were low, butonly because the fees were lower than those charged by most pay dayloan stores. I would advocate more loans be made available to thosewith low and moderate income, through any avenue, as long as therate is fair and has controls that assure the consumer won’t entera spiral of loans used to pay each other off – but then these areprinciples that are already well know and promoted by others.

The one area in this press release that makes perfect sense is therecommendation that disclosures be made in a form that enables easycomparison of the products:

They should have clear and complete disclosuresthat share common terms with other cards so that consumers cancomparison shop for their card that bests suits theirneeds.
But this isn’t new. The idea has been promoted for years by theNBPCA, which has a Disclosure Policy, andby CFSI, which recently made specific recommendations for a fee boxthat is in pilot testing with severalprepaid program managers, including Green Dot.

0
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn
Tags: Banking ChannelsCompliance and RegulationDebitMerchant AcquiringMobile PaymentsPrepaidSelf Service and ConvenienceSocial Media

    Get the Latest News and Insights Delivered Daily

    Subscribe to the PaymentsJournal Newsletter for exclusive insight and data from Javelin Strategy & Research analysts and industry professionals.

    Must Reads

    Making Real-Time Payments a Reality

    Fulfilling the Promise: Making Real-Time Payments a Reality

    July 10, 2025
    mortgage

    The Rich Benefits of In-House Payment Systems

    July 9, 2025
    digital cards

    Beyond Plastic: Why Digital Cards Are the Future

    July 8, 2025
    What Premium Card Overhauls by Chase and Amex Reveal About the Credit Card Market

    What Premium Card Overhauls by Chase and Amex Reveal About the Credit Card Market

    July 7, 2025
    Rewire Acquires Imagen, Looking at Prepaid Cards for Migrant Workers

    Smells Like Team Spirit: What Makes Cobranded Credit Cards Work

    July 3, 2025
    uk banking outages

    New Continuous Strategies for Battling Account Takeovers

    July 2, 2025
    Fraud Monitoring

    What to Expect When Nacha’s Fraud Monitoring Rules Take Effect

    July 1, 2025
    payments

    Don’t Just React to What’s Next in Payments—Anticipate It

    June 30, 2025

    Linkedin-in X-twitter
    • Commercial
    • Credit
    • Debit
    • Digital Assets & Crypto
    • Digital Banking
    • Commercial
    • Credit
    • Debit
    • Digital Assets & Crypto
    • Digital Banking
    • Emerging Payments
    • Fraud & Security
    • Merchant
    • Prepaid
    • Emerging Payments
    • Fraud & Security
    • Merchant
    • Prepaid
    • About Us
    • Advertise With Us
    • Sign Up for Our Newsletter
    • About Us
    • Advertise With Us
    • Sign Up for Our Newsletter

    ©2024 PaymentsJournal.com |  Terms of Use | Privacy Policy

    • Commercial Payments
    • Credit
    • Debit
    • Digital Assets & Crypto
    • Emerging Payments
    • Fraud & Security
    • Merchant
    • Prepaid
    No Result
    View All Result