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The Broadening Appeal of Prepaid
The Broadening Appeal of Prepaid
The Broadening Appeal of Prepaid
Research shows that prepaid payment methods are poised for more growth, as consumers embrace them for a growing range of reasons.
Prepaid cards have come a long way from the days when they were considered a tool for the unbanked. Indeed, 6 out of 10 consumers say they have recently purchased these cards. And while overall growth has been relatively at, its clear that there has been signicant increase in use among key segments. That is one of the key ndings from this years Vantiv Insights Research, which looks at consumer attitudes and behaviors related to various payment methods. At rst glance, these ndings would suggest that prepaid growth is leveling off. But a deeper look indicates that the use of prepaid cards is going to increaseessentially, because consumers like and trust them and are nding a growing range of uses for them. For banks and merchants, that reality spells opportunity. Consumers see prepaid cards as being a good t with their lives, says Royal Cole, president of Financial Institution Services, Vantiv. Banks and merchants that think strategically about how to help customers take fuller advantage of prepaid cards will be in a position to reach more consumers, drive revenue, and develop closer relationships with customers.
0%
20%
40%
60%
Any prepaid card General purpose, reloadable General purpose, non-reloadable Retailer-specic prepaid cards
Source: Vantiv Insights 2013 Research
PURcHaSiNG PREpaiD
A majority of consumers bought at least one prepaid card last year, with retailerspecic 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 for Prepaid, and incorporates data from the 2013 Vantiv Insights Research. Visit vantiv.com/research for more information.
ing prepaid being leveraged by a wider range of consumers, says Stephanie Ferris, SVP, Financial Institution Services, Vantiv. These are strong indications of future growth. Perhaps most important, prepaid cards have gained a great deal of traction among younger consumers. People age 18 to 35 are more likely than older adults to have purchased any type of prepaid card. They are especially interested in general-purpose reloadable cards, with 29% of young adults buying them, compared to 19% of 35- to 64-year-olds and just 3% of senior consumers. Young adults are also more likely to say that they intend to buy more general-purpose reloadable cards in the next year (34% vs. 26% average), while 47% plan to increase their purchases of retailer-specic cards. Some of this may be due to the fact that the youngest of these consumers are underbanked, given their generally lower income levels. But their interest in prepaid runs deeper than that. For example, they are more likely than older consumers to feel that prepaid cards are safer than cash, useful for online purchases, and useful for budgeting. And they are more likely to say that they trust prepaid cards. Younger consumers have seen prepaid cards used in a variety of ways, from e-commerce purchases to buying bus fare or lunch in the college cafeteria, says Ferris. We expect that they will carry these attitudes and usage levels forward as they make up more and more of the consumer mainstream.
EXPECT TO USE PREPAID CARDS AS A SUBSTITUTE FOR CHECKING ACCOUNTS THIS YEAR
2012 All 16%
2012 18-34
23%
2013 All
21%
2013 18-34
32%
0%
5%
15%
25%
35%
and they like the inherent discipline of having a limited amount of funds available on the card. In addition, they can dedicate specic cards to certain purchasesgroceries, entertainment, etc.and thus easily allocate set amounts to those categories. About one-third said they consider prepaid cards useful for budgeting; among young adults, that rose to 43%. And, as more cards allow consumers to track spending online, prepaid cards will be even more effective budgeting tools. Security. This is a key issue, and consumers are especially worried about the security of new forms, such as mobile payments. They see prepaid cards as offering higher levels of security and providing limited risk. Indeed, prepaid cards were cited by 67% of consumers as a secure type of in-store paymentthe highest percentage of any payment, including credit cards. By comparison, just 19% believe mobile technology is secure for payments.
vations because of perceived security issues, and because they are looking for more than just mobile paymentsthey want a platform that helps them manage their nances. By incorporating prepaid accounts into mobile wallets, the industry can help address those concerns. As the research shows, consumers see prepaid accounts as secure and useful for budgeting. Prepaid can bring those qualities to the mobile platform, giving consumers more compelling reasons to switch. This approach can also make prepaid accounts more attractive, because it gives consumers a new avenue for accessing prepaid fundsnot only in-store or online, but virtually anywhere they take their phones. Prepaid offerings will continue to evolve in step with changing customer expectations. This is an area where well see continuing innovation, says Cole. For example, prepaid can be bundled with other offerings such as tabletbased small business solutions or used by banks as a tool to bring in younger customers and grow those relationships over time. For banks and merchants, the opportunity lies in understanding new consumer perspectives, and then developing innovative approaches to giving consumers what they want.
Safer than cash* Useful for household budgeting Will use as a substitute for checking account* 0%
2013 2012
60%
80%
* Statistically signicant difference 2012-2013 at the 95% level Source: Vantiv Insights 2013 Research
About Vantiv
Vantiv LLC is one of the leading integrated payment processors in the United States. Known as Fifth 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. Vantivs credit, debit, prepaid, and mobile solutions help businesses and nancial institutions of all sizes get the most out of payment activities.