BB&T Rolling Out Prepaid Card With Higher Cost But Fewer Fees
WINSTON-SALEM, N.C. — BB&T Corp. is launching a prepaid card that costs slightly more per month than some competing products — but lacks many back-end fees that have caught the ire of advocacy groups.
Its new product comes as many banks are bracing for the loss of billions of dollars in debit card revenue under pending limits on so-called swipe fees they earn from merchants. Prepaid cards, which function like a regular debit card, are an attractive option to many banks because they are exempt from the proposed caps.
BB&T planned to offer the product before interchange regulation became an issue and is looking to deepen relationships with customers who have "difficulty managing and/or qualifying for a bank account," said Scott Qualls, the senior vice president of deposit access products for the bank.
"It truly is integrated into our banking network and leverages our existing infrastructure, which may be our mobile infrastructure, our bill-pay infrastructure, our electronic payments infrastructure, at BB&T," Qualls said.
In targeting the underbanked, BB&T is going up against a handful of third-party providers that have marketed to the segment through retail stores in recent years. Those companies, such as Green Dot Corp. and NetSpend Holdings Inc., say they have been successful at attracting consumers partly by being transparent about the fees their cards carry.
Payments experts say the prepaid market is still open for competition, especially from banks that market the cards as an alternative for consumers who don't meet minimum balance requirements for a checking account or are establishing a banking relationship for the first time.
"Prepaid is a great tool for the bank to use to capture that dissatisfied checking-account prospect and convert them into a relationship at a bank," said Philip Philliou, a partner with the payments consulting firm Philliou Selwanes Partners LLC in New York. "Think of it as an account turn-down strategy. That, I think, is the great opportunity for them to grow their customer base."
Companies such as Green Dot, which manages the customer relationship but offers cards issued through sponsor banks, have been successful at marketing via retailers. "Retailers have carved out a space with prepaid in part because they haven't had any competition from the banks," Philliou said.
What May Be Down The Road
BB&T is focusing on offering its prepaid card, called MoneyAccount, through its branches and online but may look to sell through other financial services companies and retailersd. "Right now that's down the road," he said. "That's not something we're doing any time soon."
Qualls acknowledged that the $10 monthly fee the card carries is slightly higher than what some other prepaid cards charge — including the infamous Kardashian Kard, which charged $7.95 a month, but was criticized for collecting six to 12 months of fees up front. Qualls noted that BB&T does not charge for many of the services that competitors do, such as automated teller machine balance inquiries at BB&T ATMs and some point of sale transactions.
The monthly fee can be lowered to $5 per month for customers who load at least $1,000 on it every month.
Feedback solicited from its bank branches and client focus groups suggested that customers "would prefer kind of an up-front all-in fee versus a bunch of transaction fees on the back end," Qualls said.
Comparing the card to a checking account, "this pricing is very reasonable," Philliou said.