The general purpose reloadable (GPR) prepaid card market has evolved to become a core part of the financial services landscape. Between 2012 and 2014, use grew by more than 50 percent among American adults and about 1 in 11 consumers (or nearly 23 million adults) use the cards at least monthly. Consumers increasingly look to prepaid to help them manage their complex financial lives. Many cardholders—64% of whom have incomes of $50,000 a year or less and 27% of whom are “unbanked”—report that they use their GPR card as a money management tool, particularly to control their spending and avoid overdraft fees and other debts. The industry has responded by offering savings features that allow cardholders to set aside and store money in a separate “pocket”. Today about two-thirds of prepaid cardholders have access to some kind of savings feature. Yet providers indicate that these features have limited adoption and use.
Why aren’t consumers using these features? Like a traditional savings account, a simple standalone prepaid savings pocket is not very exciting and does little to attract use. The absence of creative tools to drive engagement with savings features has perpetuated underutilization by consumers and in turn a lack of serious investment among providers. This is a missed opportunity for GPR providers to differentiate, deepen customer relationships, and drive business value. The prepaid industry can and should evolve from simply offering a basic savings pocket to creating rich, innovative features that drive consumer engagement and map a pathway to greater financial security.
Doorways to Dreams (D2D) Fund has launched several innovative solutions to make savings feel more exciting, rewarding, and achievable across the financial industry, including prepaid cards. To best take advantage of this market opportunity, prepaid card companies would do well to keep a few key insights in mind that D2D has learned along the way.