Think of a prepaid debit card like a rental car. Use it for a limited time until you no longer need it. Or in the case of the card, until the money runs out. That’s the advice from industry analyst Gwenn Bézard of the Aite Group, who provided a snapshot look at his firm’s recent research study into the growing consumer prepaid debit card market. “Lots of consumers are using prepaid cards. They are simply renting the card,” Bézard said. When the balance hits zero, the user is done. That’s a lot of rentals: Consumers loaded more than $409 billion on prepaid cards last year alone.
Bézard spoke to payments industry professionals who gathered at Intuit’s headquarters to talk about the future of prepaid cards in the United States. BayPay, a nonprofit payments industry professional group in the Bay Area, brought the group together, including Eric Dunn, Intuit’s senior vice president of payment initiatives, to delve into some of the opportunities and challenges facing the prepaid card segment.
The prepaid debit card industry is a bright spot in an otherwise gloomy economy, Bézard said. Building on slow but steady growth over the past decade, the industry has seen the sector pick up steam over the past few years. He cited solutions such as the TurboTax Refund Card and flexible spending accounts, as examples of the prepaid market’s increasing popularity, particularly with consumers.
How People Use Prepaid Cards
Consumers are using prepaid cards primarily for everyday purchases, Aite’s research shows. Here’s where they’re spending money:
- Stores and restaurants – 40 percent
- Online shopping – 27 percent
- Pay bills – 24 percent
- Other banking transactions – 9 percent
Prepaid cards are still considered an alternative service, but are growing increasingly popular with consumers searching for ways to stay out of the debt without sacrificing convenience. While commonly offered through banks and financial institutions, the cards are among new options available to consumers from companies like Intuit and Green Dot.
“I like the opportunity for Intuit, with GoPayment small businesses can accept payment easily and cost effectively, and with such a large base of customers, there is a significant opportunity for Intuit to expand the acceptance,” Bézard said.
The evening also included a panel discussion with industry leaders, including Intuit’s Dunn, who tackled several topics, including trends such as the rise of embedded prepaid cards linked to customer loyalty programs. They also discussed the benefits to prepaid cards that increasingly make it easy and desirable for customers.
The growing popularity of prepaid cards presents opportunities for consumers and businesses alike. For consumers, they offer additional opportunities for financial services. Merchants are increasingly turning gift cards into personal use products and developing loyalty programs to attract customers, or as evidenced by the launch of GoPayment’s Card offering with Visa, small merchants can use the card to get their business up and running quickly.