If you’re running a store with successful bill payment, check cashing, and money transfer offerings, you should also consider offering open loop (branded network such as Visa/MasterCard), reloadable prepaid cards. Here are some of the key reasons why.
- Consumers really want them. The Center for Financial Service Innovation (CFSI) released a study in April that highlighted the top reasons consumers want prepaid cards:
- Convenience: One-stop shopping; buy card; cash a check; buy money order; pay bills!
- Accessibility: Branded cards (with Visa, MasterCard logos) are accepted almost universally. They offer a feeling of inclusion; consumer is not differentiated from cardholders who have debit or credit cards.
- Immediate liquidity: Money is available immediately. And account updates are available on demand—by phone, by text, by email, and online.
- Simplicity and transparency: The fee structures of prepaid cards are easy to understand.
- Value: Most customers felt the costs associated with prepaid are fair and lower than what they would incur if they used a check casher or checking account.
- Built-in discipline: Prepaid cards provide much of the ease of a checking account with a major advantage—they cannot be overdrawn.
- Growth is extremely high. Mercator Advisory Group estimates growth in load volume (amount of dollars loaded to cards) to triple from $94B in 2009 to $282B in 2012.
- Drives recurring store visits. Customers are likely to come back to reload the card, leading to more check cashing, bill payment, and money transfer transactions.
- Reduced in-store cash needs. Similar to money transfer, it brings in or retains cash and reduces the amount you need to order from the bank for check cashing transactions.
- Additional commission opportunity. Depending on the program, you can earn money on card sales, card loads, and recurring monthly fees.
Coming Soon – the next article in this series: How to pick a prepaid program provider
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I’ll have to check out that Center for Financial Service Innovation report. At MiCash we find that our cardholders value the positive perceptions of having a MasterCard card that looks like credit card or checking account debit card. Also, a prepaid card is a value when they consider check cashing and wire transfer costs to friends or family members.
David – good points! I would agree that the perception of the branded card is definitely a benefit for the consumer – despite not having a bank account – they can transact like everyone else.