ORLANDO — Banks eyeing growth opportunities in prepaid cards could get a big boost from the development of remote deposit capture technology for the general purpose reloadable card market, industry experts contend.
Allowing a consumer to deposit a check directly to a prepaid card from a mobile device would represent a groundbreaking improvement for cardholders and issuers, said Priya Dozier, market product manager for Fidelity National Information Services, or FIS.
Emerging products and features for prepaid cards dominated panel discussions May 9 during the final sessions of the Prepaid Day opening here prior to the annual Card Forum and Expo.
“Being able to sit on a couch and deposit money onto your prepaid card really addresses the problem of not being able to load funds onto the card in an easy manner,” Dozier said.
Jon Hennen, director of operations at Plastyc Inc., agreed, noting that 75% of his company’s consumers own smartphones, and development of mobile applications is helping to build their trust and confidence in prepaid card products.
“I see remote deposit capture being available for prepaid cards by late 2012 or early 2013,” Hennen said.
As mobile applications for prepaid products take hold, issuers would likely see lower attrition rates among cardholders, Hennen said.
Expanded mobile options might also help reduce the typically heavy load of customer inquiries through e-mail or call centers associated with prepaid card funds-transfers, Hennen noted.
Aside from technology boosts, issuers are likely to follow the leads of major players entering the prepaid card market in terms of what features they offer, said Kevin Morrison, senior vice president, U.S. Bank.
“Chase entering the prepaid card market this week is a perfect example of how far we’ve come (in serving underbanked or non-banked consumers),” Morrison noted.
JPMorgan Chase & Co. on May 8 unveiled Chase Liquid, a prepaid card it is offering in about 200 branches before rolling it out nationwide this summer. The card carries a monthly fee of $4.95 that is waived when linked to a Chase checking account.
“We are going to see banks directing consumers to general purpose reloadable cards, and that’s where the growth is,” Morrison said.
Dozier believes financial institutions’ marketing pitches will emphasize consumers’ ability to budget money more easily with a prepaid card, while providing underbanked consumers more options, including making online purchases.
“For the most part, financial institutions have offered prepaid cards as gifts, but now there are other aspects they can promote,” Dozier said.
For example, parents can obtain prepaid cards for their children as a way to teach financial responsibility, she added.
Morrison said another possible future prepaid product could target consumers who spend a lot of money on their hobbies. "The card would be for a person who wants a card with limits just for spending on a hobby," he suggested.
Moderator Josh Turnbull, managing consultant for the Center for Financial Services Innovation, asked panelists if any emerging prepaid card trends represented “smoke and no fire.”
Hennen pointed to person-to-person funds transfers as a feature that may not be all it is cracked up to be in TV commercials.
“Of a total of $75 million overall in transactions that we see, only $140,000 of that, or less than 2%, involved person-to-person payments,” Hennen noted.
Prepaid cards targeting college students also may not be driving as many transactions as issuers had hoped, Morrison suggested.
As issuers look to future prepaid card products, Dozier said a key goal should be creating cards whose features will sustain customer relationships and promote long-term card usage.
In a separate presentation about the future of prepaid cards, Laura Kelly, senior vice president of Global Payment Options for American Express Co., suggested prepaid card products are likely to drive mobile payment innovations.
“If you lose your mobile phone with prepaid card information on it, you won’t lose credit card data (with access to far more funds),” she said.
When pitching prepaid cards to new customers, issuers can consider three basic types of prospects, Kelly advised.
The “techie,” or young consumer aware of all new technology, needs to be convinced that a prepaid card “is a cool product” to possess, she noted. The “security buff” worried about protecting funds is likely to lean on a prepaid card, while the "budget boss” consumer, or “household chief financial officer,” views prepaid cards as an excellent way to manage and control money, Kelly added.
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