BOCA RATON, Fla. -
Paying by plastic isn't just about the traditional credit card anymore, and attendees of the 19th Annual Card Forum & Expo here explored a variety of alternative payment methods from pre-paid debit cards and ATM direct payments to online pay systems like PayPal and Bill-Me-Later.
Indeed, some of these alternative payments may be a way to reach out to the underserved-not only a market credit unions are hot to go after but also a market whose spending largely goes unmonitored and is bigger than the "underserved" moniker may imply, suggested GreenDot Corp. CEO Steven Streit and TSYS Prepaid SVP-Strategy, Marketing and Business Development Chris Truelson.
Green Dot bills itself as the nation's largest reload network for VISA debit cards and MasterCard card. Consumers can reload their cards online or make a phone call to have funds instantly credited to their accounts. TSYS was an early industry leader providing pre-paid cards for payroll, health care and even teen cards.
Streit and Truelson told the seminar that recent research shows 84 million people in the United States are classified as having limited or no relationships with any financial institutions and have roughly $1 trillion in purchasing power. Truelson said many consumers see pre-paid cards as a safe, secure means of managing their money that can be bought or reloaded at a neighborhood merchant they frequent.
"The spend is flying under the radar," Truelson said, noting that the debit and credit card industry has been too focused on the product and needs to take a step back to examine how this trillion-dollar market is behaving. Some 25 million Americans have no bank account at all, he said, and they typically have trouble managing accounts, distrust the financial system, struggle keeping minimum balances and many simply have a desire to remain anonymous.
Of those 25 million, 77% use pre-paid cards at the point of sale (POS), 18% use them at ATMs and 5% of their existing funds remain on the cards. Truelson said that pre-paid card holders are using them as literal bank accounts and that the number of card loads is increasing along with a rise in the ability to reload the card.
Another trend is the further consolidation of pre-paid card issuers with small boutique issuers giving way to larger established players who can handle the logistics and liability. Green Dot CEO Streit said pre-paid cards have the same standards regarding consumer identification as credit cards when it comes to the PATRIOT Act, BSA and SARs.
"If you make a mistake, there are huge fines," he said, echoing Truelson's comments on the size of the pre-paid card market and that it is not "a toy" or fad. Streit said most of his customers use the pre-paid card as their primary buying tool.
"It's not that they don't trust banks. They don't like them. They feel ripped off by fees and the access is terrible," Streit said.
Streit cited the example of a single working mother with a couple of kids in the car, listening to a banker tell her there will be a 10-day wait to clear a check. "You can't live that way," he said.
Streit said consumers using Green Dot who sign up for direct deposit and load more than $1,000 each month have all fees waived.
