Half of banks now offering prepaid options

A new study revealed that more than half of all banks now offer prepaid cards, a growing form of payment, due to heightened regulation under the 2009 Credit CARD Act.

The survey, conducted by the Mercator Advisory Group and the American Bankers Association, asked banks of various sizes about their use or planned use of various prepaid financial products.

Approximately 60 percent of banks offer or plan to offer prepaid cards and 52 percent of banks offer general purpose reloadable cards. Eighty-five percent of financial institutions said that they viewed the current demand for prepaid products as favorable or highly favorable.

Before the 2009 Credit CARD Act, customer service-related complaints on prepaid cards were numerous. Implementation of the law, however, eliminated some of the bad practices by limiting expiration dates and getting rid of service fees, inactivity and dormancy periods on cards less than one year old, according to Daily Finance.

Banks cited the desire to add value to existing customers and to attract new customers as some of the reasons for offering prepaid products.

Thirty-four percent of banks that chose not to offer prepaid products cited concerns regarding regulatory compliance, while 26 percent of institutions cited concerns about profitability as a reason for not offering prepaid products.

“This survey will help banks see how other banks are approaching the prepaid market and where opportunities may lie,” Christopher McClinton, the vice president of the ABA’s payment solutions division, said. “It will also show prepaid suppliers the key challenges they need to address if they want to sell their products to banks that are currently on the sidelines.”

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