Viewpoint: With Expanding Use Case, GPR Poised for Growth
Traditionally, GPR cards have been positioned as an alternative to checking accounts for the financially underserved. With new ways to reload cards remotely via mobile devices and the Internet, however, the use case for GPR cards has gone far beyond just an alternative to checking accounts. In fact, the GPR landscape is changing at such velocity that it may be a challenge for prepaid providers to keep their fingertips on the pulse of the changing cardholder profile.
|MasterCard’s proprietary research shows that more than half of all GPR cardholders have credit cards, 77 percent have checking accounts and 64 percent have a savings account.|
According to latest research by Phoenix Marketing International, GPR adoption is rapidly growing among middle and higher income households that already have access to checking accounts. The research shows that card ownership among households with more than $100,000 in annual income is growing more than twice as fast as for all other households, and that the average GPR cardholder earned more than $63,000 in annual income in 2013. This aligns well with MasterCard’s proprietary research, which shows that more than half of all GPR cardholders have credit cards, 77 percent have checking accounts and 64 percent have a savings account. In terms of age, in 2013 almost half of all GPR cardholders are millennials.
Clearly, a significant percentage of today’s GPR cardholders are significantly different demographically from the financially underserved. Cardholders today are affluent young adults using GPR cards for easier expense management, small business owners looking for tighter spend controls and visibility over employee purchases, travelers running on a lean budget or parents looking to control and monitor the expenses of their children. The use of GPR cards is no longer based on a precise, narrowly defined cardholder using the service for a predictable reason. With the right marketing and distribution strategy, GPR cards now have the potential to reach mass-market segments.
Tapping High-Income, Impulse Buyers
What may be even more interesting is that many consumers do not acquire GPR cards with a specific use case in mind. Many cardholders sign up for prepaid cards because they are attracted to the idea of having an added payment option at a negligible acquisition cost. Others acquire cards because of a unique, attractive look and feel compared to traditional debit or credit cards. Especially in the high-income segment, card acquisition is more of a discretionary, impulse decision rather than a need-based one. And, after acquiring the card, consumers naturally find use cases for spend based on their own, personalized way of doing things.
One person may load money on the card to pass it onto a younger sibling in college, while another may use it for small-ticket expenses as a way to prevent small-ticket items from taking over her credit card statements. The next consumer may use GPR as a small business expense management solution by gaining visibility into employee purchases. In many ways, GPR cards serve as a better alternative to cash and checks, both of which have proven to be extremely expensive methods of payment. You only have to look around and observe how different people, especially millennials, use prepaid cards and manage finances to see how the use case for GPR varies quite broadly.
The changing customer mix of GPR cardholders represents opportunities for prepaid programs. With the changing use case for GPR cards and with the changing profile for GPR cardholders, market conditions favor broad product offerings focused on providing new consumer segments not necessarily with a predefined use case but rather with a product that can add value in so many different ways. The marketing has to highlight a broadly applicable reason for card acquisition rather than a narrowly defined use case.
Overall, the industry seems to be poised for rapid growth. The adoption of GPR by higher-income households is a positive sign, as higher-income households are likely to spend higher amounts on GPR, driving growth in purchase volume. The adoption by millennials, again, is a positive sign, given that about 25 percent, or 80 million, of the U.S. population consists of millennials. If card usage successfully transitions into future life stages, card adoption by millennials could prove to be one of the biggest growth drivers for GPR.
Usman Gul is an analyst at MasterCard’s headquarters in Purchase, N.Y. He currently works in the prepaid practice for North American Markets. Prior to prepaid, Usman worked in MasterCard’s commercial T&E practice. He can be reached at [email protected].