Last year, I wrote a piece (for another publication) that looked at how prepaid debit card providers could collectively improve their image – because, let's face it, deservedly or not, there's always been a stigma attached to the industry.
That stigma appears to have ebbed a bit over the last year. You could argue that this is due to traditional financial institutions, like American Express (AXP) and JPMorgan Chase (JPM), introducing low-fee products in the space. Or you could say the rapidly growing number of underbanked customers opting for innovative nonbank prepaid alternatives has made it harder to deny these products' worth.
Whatever the cause, the ultimate effect – a growing list of competitors entering an increasingly respectable payments space – makes me inclined to offer one more piece of advice to prepaid providers as we head into 2013: If you want to be taken seriously, please, please, please ditch your celebrity partners.
I say this following the recent announcement that prepaid provider BillMyParents is entering into a "strategic partnership" with teen idol Justin Bieber. But, truthfully, I've always found the relationship between celebrities and prepaid cards a bit baffling. This question just always seemed obvious: Why does an industry so often criticized for offering high fee structures to low-income consumers think it can win over critics by adding members of the 1% to the payroll?
To be fair, music mogul Russell Simmons, sports star Magic Johnson and personal finance expert Suze Orman essentially own the prepaid companies they run. And Yankee third baseman Alex Rodriguez – whose Dynasty Card is an offshoot of Simmons' RushCard – is an investor who makes (or loses) money based on the performance of its portfolio.
BillMyParents declined to offer specifics about the role Bieber would play or how he is being compensated, but it sounds as if their pairing will fall more along the lines of a traditional endorsement deal (the Securities and Exchange Commission filing disclosing the partnership certainly classifies it as such.)
Their press release, however, does contain a line that sounds strikingly familiar: "Our mission is to help families teach responsible spending habits. By combining our new teen prepaid debit card with Justin's vast reach and financial educational materials, we can empower countless families with teens to think about responsible spending in a new and better way.'"
It sounds familiar because celebrity prepaid product partnerships are often linked to financial literacy, or, perhaps more specifically, a need to reach a demographic the company believes needs this literacy.
RushCard told me Simmons established the company "with the sole objective of empowering those left behind by the mainstream banking system." Similarly, Mango Financial says its partnership with the comedian George Lopez "is focused on the commitment to financial empowerment" and "was specifically established to raise awareness of Mango's low fee products and services."
I won't question intent, because, quite honestly, it's irrelevant. No matter what label you assign them, celebrities will do little to help prepaid providers, primarily because celebrities have a long and sordid history of endorsing the predatory products the industry as a whole needs to distance itself from.
Consider the late Gary Coleman's commercials for the payday lender CashCall, or Montel Williams' endorsement of another such outfit, MoneyMutual. Or an example that hit much closer to home: the Kardashian sisters' disastrous attempt to launch a now defunct prepaid product of their own.
Granted, celebrities have also lent their faces to traditional financial products. This works in varying degrees because banks and credit card issuers, while certainly in need of their own reputational revamp, (a) aren't aiming to find a foothold and (b) largely don't pair celebrities with products completely out of sync with their lifestyles.
An American Express ad campaign that featured several celebrities, including Beyonce Knowles and Martin Scorsese, using their Amex cards made sense because the company has traditionally marketed its credit and charge products to affluent individuals. (If they asked Knowles to back Bluebird, I'd be more critical.)
Conversely, the notion that multimillionaire Justin Bieber is going to use a BillMyParents card – a rather innovative product in that its key feature allows parents to manage their kids' finances – is much harder to swallow. (Unless he gives his parents an allowance, which he could use the card to monitor. That would make for a killer commercial, but it hardly speaks to the challenges facing the card's target audience.)
The use of a celebrity also won't do much to widen a company's target audience, something that should be a concern, even for niche prepaid providers, as more and more competitors enter the space.
If a celebrity is particularly passionate about promoting financial literacy (and believes a particular prepaid product is the best way to do this), then I suggest letting them do so from the sidelines.
Alternately, if selling a ton of prepaid cards to your target audience is the ultimate goal, than fine, bring on Bieber (and admit that's why he's around). He's certainly good at selling nail polish.
But if the aim is to establish credibility with consumers and stand out among a widening field of competitors, then leave the famous faces out of your marketing materials.