As the demand for reloadable prepaid cards grows, distribution is expanding further beyond traditional venues such as convenience stores as more companies sell the cards next to long-established financial services such as funds transfers.

NetSpend Holdings Inc.'s recent distribution deal with DolEx Dollar Express Inc., the U.S. subsidiary of Money Transfer Acquisition Inc., is the latest such partnership in this trend. It coincides with a push by Western Union Holdings Inc. to use prepaid cards to deepen relationships with its own transfer clients.

For NetSpend, which already sells its cards through check-cashing stores and Western Union locations, the agreement with DolEx furthers its diversification beyond dollar stores and convenience stores — even as it signs new agreements with the likes of 7-Eleven Inc. and Family Dollar Stores Inc. DolEx operates 550 proprietary company-owned retail locations that specialize in funds transfers.

Western Union says prepaid cards and conventional funds transfers are complementary — using a prepaid card lifts a customer's transfer and remittance business by 10% to 15%, according to the company's research. 

"The more products and services we can deliver that meet customer needs, the stronger the loyalty we drive with our overall customer base," Michael Hafer, Western Union's senior vice president of global prepaid, said in an interview last month.

Building on the example of more experienced prepaid card sellers like NetSpend, Western Union also offers cards through 7-Eleven and Dollar General Corp., among other stores. NetSpend executives did not provide comment by deadline.

Although retailers are willing to sell cards from a growing number of providers, even their appetite must have a limit.

"There are a lot of [prepaid card providers] in the space, probably too many," says Aite Group senior analyst Madeline Aufseeser. "I don't know that the market can support all the players in the space."

Western Union has great potential, she says, but it is well behind rivals NetSpend and Green Dot Corp. because of its late entry. NetSpend and other rivals to Green Dot also stand to benefit from the fading exclusivity of Green Dot's distribution partnerships

"One of the things the industry has been talking about is the need for these companies to be diversified in how they distribute their products and acquire new customers," Aufseeser says. "NetSpend has certainly been a leader in the market in trying to move into adjacent channels that they're already doing business in."

As these companies explore more distribution partnerships, they are feeding the growing demand for reloadable prepaid cards among consumers, says analyst Scott Strumello of Auriemma Consulting Group.

"I think the wider distribution is a direct result of demand that already exists, but having wider distribution may also increase overall demand by making the product more widely available," Strumello says. Either way, "it's fair to presume that sales of prepaid cards will grow," he says.

Auriemma's research shows the incidence of prepaid cards is fairly broad across most demographic groups of the U.S. population, with more than half of those surveyed claiming to have purchased a prepaid card at one point or another, Strumello says. There is a nearly evenly split between single-use prepaid cards and reloadable prepaid cards, he says.

The research looked only at past use, not intent to buy, Strumello says.

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