By Ray Birch
ST. PETERSBURG, Fla.—It isn’t just the approaching holiday shopping season that should have credit unions paying attention to prepaid plastic, according to one expert, who is reminding consumers are turning in large numbers to the product.
Cody Banks’ outlook for prepaid gift cards and reloadable prepaid is bright due to the light the pandemic has shined on the product.
“Yes, prepaid sees a lot of attention this time of year,” said Banks, VP of payment and fraud solutions at PSCU. “But data is showing that this is a strong product for the credit union for the entire year.”
Banks pointed to Mercator Advisory Group data that show loads onto general purpose reloadable cards are expected to grow at 13% annually through 2025, while loads onto gift cards are expected to grow at 9% annually through 2025.
“Which means increasing the profitability of prepaid programs is key for credit unions for the foreseeable future,” he said.
Product for the Entire Year
Open loop amounts on prepaid loads have also increased by about $150 billion since 2015, added Banks, again citing the Mercator data.
“This has become a product for the entire year,” stressed Banks.
Boosting awareness of prepaid among consumers, according to Banks, is how the pandemic taught many to watch their household balance sheets. Data show spending on credit markedly declined early in the health crisis in favor of debit, as consumers spent money they had in their savings.
In addition, as CUToday.info has extensively reported and every credit union knows all too well, consumers’ savings are at an all-time high.
A Helpful Tool
Banks said all of that has led consumers to view prepaid as an even greater tool to manage their money, keeping them from overspending by limiting what they can charge to the balances on their prepaid cards.
“Prepaid is moving to become more of a mainstream product,” said Banks, adding that a number of PSCU-member credit unions are seeking to add card controls to their prepaid offerings.
Cody Banks
What all that adds up to, said Banks, is mounting interest in prepaid—once seen as just an offshoot of traditional cards—as consumers want prepaid to have all the bells and whistles their top-of-wallet plastic.
Banks said prepaid plastic is projected to remain strong through 2025, including gift cards and prepaid reloadable. Prepaid usage, too, has climbed during the pandemic as more local governments use prepaid to distribute assistance to consumers.
New Product Introduction
“We've being seeing consumer interest in this market rise and it has led PSCU to invest more in the prepaid experience. And that's all because of, getting back to the effects of COVID, people want more ability to control their spending,” said Banks.
PSCU recently introduced My Card Manager, which allows cardholders to easily conduct their prepaid banking needs through their preferred channel.
“My Card Manager enables credit union members to view transaction history, check balances, budget and receive real-time alerts,” said Banks. “The mobile app also provides members with the latest security features, including touch ID, face ID, device recognition and lock or unlock card.”
My Card Manager also includes the Smart Budgets tool, a personal finance money manager that can set money aside toward specific goals and will automatically track 30 days of transactions.
‘Table Stakes Product’
In short, said Banks, credit unions need to recognize prepaid is beginning to become a table stakes product.
“In the evolving payments space, you have to pay attention to prepaid,” said Banks. “We are seeing all new kinds of uses for prepaid, such as charitable contributions, unemployment benefits and even to deliver cash as incentives for getting vaccinated. Reloadable cards, too, are being used more for youth accounts, like Greenlight and GoHenry, which allow parents to control the spending of their kids and teach them financial literacy as well.”
Banks said PSCU is seeing new spend as a result of increased prepaid usage by consumers, but he believes the product is stealing slightly from credit.
“For the last 18 months I look at this as more of a companion to debit, so it's probably taking a bit from what folks would have normally used for credit,” said Banks. “I would tell credit unions to just look at your portfolio holistically and try to meet your members where they're at. Prepaid has become far more than just a holiday piece of overall card spend.”