A number of players – particularly non-bank organizations – are actively marketing general-purpose prepaid cards to the unbanked and under-banked segments as a viable alternative to a checking account.
According to a recent survey by SYNERGISTICS Research entitled, Relationship Strategies for Checking Accounts, a small proportion (2%) of consumers are already using prepaid cards in lieu of checking. Additionally, one-fourth express the likelihood of doing so in the future (Exhibit 1). Both current usage and intent is stronger among 18-34-year-olds. Current usage of prepaid cards instead of checking is also much stronger among lower-income households, but the likelihood of adopting prepaid cards does not vary significantly by household income group.
Among those likely to adopt prepaid cards, banks, credit unions, or other financial institutions are the top location where these prepaid cards would be purchased, indicated by four in ten (Exhibit 2). One-third might purchase a prepaid card from a supermarket or grocery store, while an equal number identify department or discount stores. Three in ten would purchase via the websites of major credit card issuers or the websites of financial institutions. One-fourth would consider drugstores or convenience stores.
‘Checking account providers, depending on the extent of under-banked and unbanked households in their own market footprints, should give serious consideration to adding general-purpose prepaid cards to the checking product line,” explains Genie M. Driskill, COO of SYNERGISTICS.
‘Recent notable activity in this area is the joint venture between American Express and Walmart who have introduced a prepaid card product called Bluebird. Depository institutions should not cede this place in the market to non-bank players, as many of these households may indeed become customers for traditional banking products as they improve their financial status over time.”
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