More large financial institutions likely will begin to explore the realoadable prepaid card market now that the Senate today passed the Wall Street Reform and Consumer Protection Act, observes one industry analyst.
The legislation, which President Obama is expected to sign, includes the controversial interchange amendment that requires the Federal Reserve Board to set debit card rates that are “reasonable and proportional” to the cost of processing the transactions. But prepaid cards used to distribute government benefits and other reloadable debit cards are exempt.
“Bank might be looking to get into prepaid more to make up for lost revenue because of [reduced] debit [interchange rates],” Tim Sloane, the director of Mercator's prepaid advisory service, tells PaymentsSource.
There had been some industry rumblings that banks would abandon the prepaid market if the government exemption was absent from the final bill. That is no longer the case.
“It’s the wrong time to get out of prepaid and the right time to explore it more,” Sloane says.
In a recent interview with PaymentsSource, T. Jack Williams, president of Paymentcard Services Inc. in Dallas, acknowledges that government and payroll cards will be the key drivers for open-loop, reloadable prepaid cards moving forward (see story).
Indeed, multiple industry reports conclude the prepaid sector is growing by leaps and bounds.
A Boston Consulting Group report released earlier this week predicts the total value loaded annually into network-branded prepaid debit card accounts in the United States could reach $440 billion by 2017 (see story).
Funds loaded into card accounts tied to the public sector, which includes unemployment cards, will total $163 billion by 2017, up from an estimated $31.7 billion in 2009, the report said.
The amount loaded into payroll card accounts, which includes a large percentage of cards in the private sector, will total $99.6 billion by 2017, up from $25.6 billion in 2009, the report said.
Prepaid card providers such as nFinanSe Inc. see nothing but prosperous growth in the space for years to come.
Despite facing stiff competition in the prepaid space from the likes of Wal-Mart Stores Inc. and Green Dot Corp., Jerry Welch, nFinanSe chairman and CEO, believes those companies have helped to spur the industry because of a $3 purchase price, reload and monthly maintenance fee.
“We have similar prices and have seen high acceptance of our products and the market is really starting to accelerate,” Welch tells PaymentsSource.