Vantiv Report: Banks, Younger Consumers Signal Prepaid Growth (Nov. 21, 2013)
Financial institution and merchant executives looking to capitalize on industry growth opportunities anticipate expansion in prepaid card products, especially among younger consumers, according to new research from Vantiv. In its annual report on “Executive Thinking on Payments,” released Nov. 20, Vantiv outlined industry leaders’ views, drawing on interviews with more than 40 executives and online surveys of 1,200 consumers from earlier this year in conjunction with Mercator Advisory Group. Among key findings: Executives expect to see prepaid card usage grow in certain segments, as merchants favor closed-loop prepaid cards as a secure and low-cost payments channel and banks enrich their GPR offerings, said Lorena Harris, Vantiv’s vice president for consumer marketing.
According to the report, 43 percent of consumers plan to rely more heavily on all types of prepaid cards in the coming year, and 32 percent of consumers ages 18 to 34 expecting to use a GPR card as a substitute for a checking account, up from 23 percent last year. Among all adult consumers, 21 percent expect to use a GPR card as a checking account substitute, up from 16 percent last year.
Banks are seeing fresh interest in GPR cards particularly among younger adults, according to Ken Paterson, Mercator’s head of research operations. One in three financial institutions currently offers a GPR card, and two in five are planning to do so, the data suggest. Many bank executives interviewed also said they are looking to beef up their GPR cards’ reloading capabilities, including improving online GPR features and moving to include GPR cards in their mobile wallets, Paterson said.
While financial institutions and merchants share concerns about nontraditional players like PayPal, Google and Apple gaining an advantage through disruptive new mobile payments technology, execs also see many near-term opportunities to enhance their own customer relationships. Examples include merchants enriching proprietary mobile wallets to handle coupons, loyalty and to track spending, which supports consumer data suggesting the broader shopping experience is more important than the payments aspect, Paterson said. In addition to enriching GPR card programs, banks also are beefing up mobile banking features popular with consumers—such as remote deposit checking—on their path to broadly supporting mobile payments, he said.