WASHINGTON — Credit unions seem to be increasingly willing to take another look at prepaid cards as a product offering.
According to Tony Ficarra, executive VP with Fidelity National Information Systems, Jacksonville, Fla., credit unions have dismissed prepaid cards in large part due to a misunderstanding of the market and member demand.
"There is money to be made in prepaid cards," Ficarra told Credit Union Journal. "We try to do packages that are easier to get into. There is income to be had with interchange, and the cost of making the money is spread out. It's all fee-based income in a different form. Fees are a conundrum for credit unions. You do not, as a credit union, want to fee your members. But what I am suggesting does not violate the sensibility of the credit union."
Where credit unions have misunderstood the prepaid card market is in viewing it from the financial institution point of view rather than from the members' point of view.
Consumers Vs. Institutional View
"For instance, credit unions say they don't want to take members' money in advance," he said, before citing examples of what might be viewed as irrational behavior by members. "When you look at how consumers spend money, it's not how financial institutions view money," said Ficarra. "Why would anyone use a debit card when they could use a credit card?"
Separately, Ficarra said the company has seen debit card volume increasing, although the average transaction size has decreased, indicating economic "pressures" are playing a role and more people are using debit for necessities.
He said the company has been contacted by more credit unions seeking new ideas and options in plastic cards to generate both revenue and serve members. And among those options, he said, are prepaid cards, which continue to have a non-redemption rate of approximately 20%-25%. Among the trends FIS has seen in prepaid cards is consumers moving more quickly to redeem the cards. "People are putting them right to work," said Ficarra.
Apart from the prepaid cards, Ficarra said the company's SecureDebit and SecureCredit fraud prevention tools has proven to not just be effective at reducing fraud, but at reducing insurance premiums from CUNA Mutual, too. "It not just takes the error rate down, it frees up someone time for an additional hour a day that can be used to serve members," said Ficarra.
