the broadening appeal of prepaid

8/13/2019 The broadening Appeal of Prepaid

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The broadeningappeal of prepaid


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The broadening

appeal of prepaid

Prepaid cards have come a long wayrom the days when they were consid-ered a tool or the unbanked. Indeed, 6out o 10 consumers say they have re-cently purchased these cards. And whileoverall growth has been relatively flat,it’s clear that there has been significant

increase in use among key segments.

That is one o the key findings romthis year’s Vantiv Insights Research,which looks at consumer attitudes andbehaviors related to various paymentmethods. At first glance, these findingswould suggest that prepaid growth isleveling off. But a deeper look indicatesthat the use o prepaid cards is going toincrease—essentially, because consum-ers like and trust them and are finding agrowing range o uses or them.

For banks and merchants, that realityspells opportunity. “Consumers seeprepaid cards as being a good fit withtheir lives,” says Royal Cole, presidento Financial Institution Services, Van-tiv. “Banks and merchants that thinkstrategically about how to help custom-ers take uller advantage o prepaidcards will be in a position to reach moreconsumers, drive revenue, and developcloser relationships with customers.”

An Increasingly Varied

Consumer Base

In this year’s study, 60% o consumerssaid they had purchased some type oprepaid cards in the past 12 months—not much different than last year’s 63%

However, when looking specifically atgeneral-purpose prepaid cards, theresearch saw usage increase 4 percent-age points year over year. And amongthose who bought prepaid cards, 43%said that they expect to buy even morethan they did in the past.

At the same time, prepaid cards areappealing to an increasingly broadrange o consumers. Prepaid cards havetraditionally been embraced by under-banked and lower-earning consumerswho may find it difficult to open check-ing and credit accounts at banks. That isno longer the case. Today, the researchound, the likelihood o purchasing ageneral-purpose reloadable card is es-sentially the same across income levels,with one notable exception: Consumersearning less than $50,000 a year areactually less likely than higher-incomeconsumers to have bought one. “We’reseeing people planning to increase theirprepaid card purchases, and we’re see-

Research shows that prepaid payment methods are poised or more

growth, as consumers embrace them or a growing range o reasons.

0% 20% 40% 60%

60%

19%

25%

50%

49%58%

19%

50%

Purchased in the past 12 months

PREPAID CARDS PURCHASEDIN THE PAST 12 MONTHS, ANDINTENT TO PURCHASE IN THENEXT 12 MONTHS

Intend to purchase in the next 12 months

■Any prepaid card

■General purpose, reloadable

■General purpose, non-reloadable

■Retailer-specific prepaid cards

27%

Source: Vantiv Insights 2013 Research

PURCHASING PREPAID

A majority of consumers

bought at least one prepaid

card last year, with retailer-

specific cards being the

most popular. About the

same number expect to buy

cards in the coming year.

Note: This paper is an addendum to the Vantiv Insights 2012 white paper, “The Case or Prepaid,”and incorporates data rom the 2013 Vantiv Insights Research.Visit vantiv.com/research or more inormation.


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ing prepaid being leveraged by a widerrange o consumers,” says StephanieFerris, SVP, Financial Institution Servic-es, Vantiv. “These are strong indications

o uture growth.”

Perhaps most important, prepaid cardshave gained a great deal o tractionamong younger consumers. Peopleage 18 to 35 are more likely than olderadults to have purchased any type oprepaid card. They are especially inter-ested in general-purpose reloadablecards, with 29% o young adults buy-ing them, compared to 19% o 35- to64-year-olds and just 3% o senior con-sumers. Young adults are also more likely

to say that they intend to buy moregeneral-purpose reloadable cards in thenext year (34% vs. 26% average), while47% plan to increase their purchases oretailer-specific cards.

Some o this may be due to the actthat the youngest o these consumersare underbanked, given their generallylower income levels. But their interestin prepaid runs deeper than that. Forexample, they are more likely than olderconsumers to eel that prepaid cardsare saer than cash, useul or onlinepurchases, and useul or budgeting.And they are more likely to say that theytrust prepaid cards. “Younger consum-ers have seen prepaid cards used ina variety o ways, rom e-commercepurchases to buying bus are or lunchin the college caeteria,” says Ferris.“We expect that they will carry theseattitudes and usage levels orward asthey make up more and more o theconsumer mainstream.”

Meeting Consumers’ Needs

There are several reasons or thewide-ranging appeal o prepaid cards.

Certainly, the underbanked are still animportant segment. According to theFederal Deposit Insurance Corp., onein five U.S. households all into thatcategory. And a Vantiv/GK survey oshoppers last holiday season indicatesthat a growing number may be hav-ing difficulty establishing ull bankingrelationships, with 37% o respondentssaying they didn’t have access to debitcards, up rom 28% the previous year,and 34% having no access to bankcredit cards, up rom 22%.

However, consumers in all segments arelooking or ways to avoid rising checking-account ees, and prepaid cards offeran alternative with the bonus o addedspending controls. Overall, more con-sumers are using prepaid cards as asubstitute or checking accounts thisyear (23%) than last year (16%). Nearlyone-ourth said they plan to do so in thenear uture, with 32% o young adultssaying they expect to make that change.

The research also ound that consumersare interested in prepaid because o:

Convenience. Consumers said conve-nience was a top reason they choose apayment method, and prepaid cards areamiliar and simple to use. In the Vantiv/GK study, 29% said prepaid cards werean easy payment method, up rom 17%.

Budgeting tools. Consumers are look-ing or help in managing their spending,

LOOKING FOR MORE

Among consumers who

bought cards last year, many

expect to increase the num-

ber of cards they purchase

in the coming year.

0% 5% 15% 25% 35

16%


2012

All

2012

18-34

2013

All

2013

18-34

23%

21%

32%

EXPECT TO USE PREPAID CARDS

AS A SUBSTITUTE FOR

CHECKING ACCOUNTS THIS YEAR


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Vantiv Corporate Headquarter

8500 Governors Hill Drive, Cincinnati, OH 4524866-622-2880 | www.vantiv.com

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and they like the inherent disciplineo having a limited amount o undsavailable on the card. In addition, they

can dedicate specific cards to certainpurchases—groceries, entertainment,etc.—and thus easily allocate setamounts to those categories. Aboutone-third said they consider prepaidcards useul or budgeting; amongyoung adults, that rose to 43%. And, asmore cards allow consumers to trackspending online, prepaid cards will beeven more effective budgeting tools.

Security. This is a key issue, and con-sumers are especially worried about the

security o new orms, such as mobilepayments. They see prepaid cards asoffering higher levels o security andproviding limited risk. Indeed, prepaidcards were cited by 67% o consum-ers as a secure type o in-store pay-ment—the highest percentage o anypayment, including credit cards. Bycomparison, just 19% believe mobiletechnology is secure or payments.

The Mobile Connection

Today, mobile technology is bringingnew customer payment and interactionchannels into a growing multichan-nel mix, and prepaid methods can playan important role. While the Vantivresearch ound that many consumersexpect to be using mobile paymentswithin five years, they expressed reser-

vations because o perceived securityissues, and because they are looking ormore than just mobile payments—they

want a platorm that helps them man-age their finances.

By incorporating prepaid accounts intomobile wallets, the industry can help ad-dress those concerns. As the researchshows, consumers see prepaid accountsas secure and useul or budgeting.Prepaid can bring those qualities tothe mobile platorm, giving consumersmore compelling reasons to switch. Thisapproach can also make prepaid ac-counts more attractive, because it gives

consumers a new avenue or access-ing prepaid unds—not only in-store oronline, but virtually anywhere they taketheir phones.

Prepaid offerings will continue to evolvein step with changing customer ex-pectations. “This is an area where we’llsee continuing innovation,” says Cole.“For example, prepaid can be bundledwith other offerings such as tablet-based small business solutions or usedby banks as a tool to bring in youngercustomers and grow those relationshipsover time.”

For banks and merchants, the opportu-nity lies in understanding new consumerperspectives, and then developing inno-vative approaches to giving consumerswhat they want.

About Vantiv

Vantiv LLC is one o the leading integrated

payment processors in the United States.

Known as Fifh Third Processing Solutions

since 1971, the company, headquartered in

Cincinnati, Ohio, changed its name to Vantiv

in 2011, and became a public company in

2012. Vantiv’s credit, debit, prepaid, and

mobile solutions help businesses and financial

institutions o all sizes get the most out o

payment activities.

THE APPEAL OFPREPAID

Consumers trust prepaid

cards and think they are se-

cure—and they see a variety

of uses for them.

0% 20% 40% 60%

62


I can trustgeneral-purpose

prepaid cards

I can trustretailer prepaid

cards*

Useful for onlinepurchases*

Safer than cash*

Useful forhouseholdbudgeting

Will use as asubstitute for

checkingaccount*

62

61%

57%

55%

49%

44%

38%

16%

23%

36%

AGREEMENT WITH STATEMENTSABOUT PREPAID CARDS

(Base-All, Top 2 box)

■20

■20

* Statistically significant difference 2012-2013 at the 95% leve

the broadening appeal of prepaid

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