News

Prepaid card use on the rise among Gen Y

April 11, 2012

More consumers are giving debit cards the go-by in favor of prepaid plastic. One in six underbanked customers and one in six Gen Y customers are choosing prepaid cards as their banking instrument of choice, a recent report from Javelin Strategy and Research said.

The report, “Prepaid Cards and Products in 2012,” found that while the use of prepaids was rising, the ownership of checking and savings accounts, credit cards and debit cards was on the decline.

Users were attracted to prepaids by innovative features such as advanced online and mobile account management, rewards programs and credit history development.

“Mobile alerts, mobile rewards delivered via geolocation services, and mobile account management are some of the many features now incorporated into prepaid products, said Javelin President Jim Van Dyke in a release announcing the new study. “Providers offering integrated mobile tools are well positioned to deliver high value to young and underbanked prepaid card owners.”

The study suggested the FIs could use prepaids as a first step toward establishing banking relationships with the un- and underbanked. The Javelin report also revealed that:

• 56 percent of underbanked consumers said they use their prepaid card for an online purchase, compared to 46 percent of all prepaid owners.
• Underbanked consumers report higher average reload amounts than do other consumers.
• 53 percent of Gen Y and 47 percent of underbanked consumers report that rewards would encourage their adoption and use of prepaid cards.

For more on this topic, visit our trends/research research center.