Issuers of reloadable prepaid debit cards are going after the "banked" crowd.

As competition intensifies, issuers are beefing up card features and looking to expand their distribution through new retail channels, including certain niches of consumers that may have well-entrenched banking relationships.

In one of the latest such endeavors, American Express Co. on March 21 announced a partnership with Office Depot to roll out the office supply chain's first prepaid card at a selection of its 1,100 stores in the coming months.

Amex introduced its low-cost prepaid card last November (see story).  A temporary one-time card load is $4.95 in Office Depot stores; customers may order a permanent, reloadable card online.

The goal with Office Depot is to target "small businesses or families looking to manage their day-to-day finances," including "those who use cash, debit and checks to manage their money and those who don’t use credit products," an Amex spokesperson told PaymentsSource via email.

While the target customer presents a complex picture of an entrepreneur or small-business owner on relatively solid financial footing, that customer may have specific reasons to want to control its spending in certain categories, Madeline Aufseeser, a senior analyst with Aite Group, tells PaymentsSource.

"Our research indicates many reloadable prepaid card customers have more financial relationships than some people think," she says. "And while they may have above-average income, too, they want to use prepaid cards to control and manage spending in different categories."

Examples include segregating business or household spending by restricting certain funds to prepaid cards and providing family members or employees with reloadable prepaid cards, she says.

Amex's move also underscores its goal of expanding its prepaid cards into new retail channels. Amex in November announced a deal to distribute a similar card, the American Express for Target prepaid card (see story).

The card brand is working on additional distribution deals with specialty and mass-market retailers, the Amex spokesperson says.

"Most of the bigger prepaid card programs until recently had only a single-thread distribution strategy, whether it was online or through Walmart or convenience stores. But that is changing," Aufseeser says.

Examples include NetSpend Corp. expanding its distribution from many smaller, independent distributors into 7-Eleven Co. stores (see story). A growing number of supermarket chains also are beginning to carry a broader range of prepaid cards, Aufseeser says.

Exclusive deals with retailers to distribute specific prepaid card brands are unlikely to emerge, Aufseeser says.

"Like gift cards, prepaid reloadable cards are expanding through diverse retail channels, but there is still a lot of room for growth," she says.

As prepaid cards expand into mainstream retail outlets, they may find new audiences, Aufseeser says.

In an online survey of 250 reloadable prepaid debit customers Aite conducted during the first quarter of 2011, 86% said they had a checking account, 80% said they had a bank debit card, and 61% said they had a credit card.

Some 67% of prepaid cardholders said they used their card most frequently for spending, according to Aite.

Amex also on March 21 announced expanded features for its prepaid cards.

Cardholders now may withdraw up to $400 per day from ATMs and may load funds into card accounts using the Vanilla Reload Network by InComm, in addition to MoneyPak.

Cardholders also may load up to $5,000 monthly into the card accounts from paychecks via direct deposit at no charge.

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