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The prepaid card sector is growing at a rapid clip, but not all FIs are sold on them, says a new study by Mercator Advisory Group and the American Bankers Association.

"Prepaid Cards:  A Survey of Bank Attitudes, Adoption Rates and Deployment Plansasked banks of all sizes about their use — or planned use — of various prepaid financial services products such as general purpose reloadable cards, gift cards and payroll cards.

The survey found that of banks currently deploying prepaid products:

  • 58 percent currently offer or plan to offer prepaid gift cards;
  • 52 percent currently offer or plan to offer GPR cards; and
  • 85 percent say they view current demand for prepaid products as favorable or highly favorable.

Of banks that have chosen not to deploy prepaid products:

  • 34 percent say the primary reason was concern about regulatory compliance requirements; and
  • 26 percent say the reason is concern about profitability.

The survey revealed that while FIs' top reasons for deploying prepaid cards were customer retention and attraction, other important reasons included creating a new type of account to  to serve low and moderate income customers as well as those who cannot qualify for a checking account.

"This survey will help banks see how other banks are approaching the prepaid market and where opportunities may lie," said Christopher McClinton, vice president of ABA payments solutions.  "It will also show prepaid suppliers the key challenges they need to address if they want to sell their products to banks that are currently on the sidelines."

The entire Mercator report is available online.

For more on this topic, visit the trends/statistics research center

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