A recent report released by Javelin Strategy and Research reveals that prepaid cards are becoming increasingly popular with underserved consumers, including youngGeneration Y consumers and consumers who do not have savings or checking accounts.
The study revealed that approximately one in six of these consumers holds a prepaid card and that their use of traditional banking products like checking and savings accounts has decreased, PYMNTS.com reports.
Banks and other financial firms use prepaid cards to gain loyalty among young and underbanked customers with the hope that they will choose that bank’s traditional banking products in the future.
“Today’s prepaid features match and even surpass the features of many checking accounts,” Beth Robertson, the director of payments research at Javelin, said, according to PYMNTS.com. “Functionality that can enable consumers to manage their account using their mobile device or social media account, establish and build a history that can be used for credit-issuing or enable person-to-person transfers provide high value to underserved consumers.”
Growing mobile and e-commerce markets have contributed to the value of prepaid card use for underserved consumers. Approximately three-fifths of underserved consumers regularly use prepaid cards to make online purchases. These consumers also have increasing access to emerging mobile services and devices.
“Mobile alerts, mobile rewards delivered via geolocation services and mobile account management are some of the many features now incorporated into prepaid products,” Javelin President Jim Van Dyke said, PYMNTS.com reports. “Providers offering integrated mobile tools are well positioned to deliver high value to young and underbanked prepaid card owners.”