MasterCard Inc. is preparing to address what many prepaid card executives call the niche's No. 1 problem: consumer awareness.
The Purchase, N.Y., payments network is planning to unveil a consumer advertising campaign this spring, including television commercials, to promote reloadable prepaid cards to a larger audience.
Laura Kelly, MasterCard's senior vice president of global prepaid solutions, said the campaign's slogan — "Everyday Prepaid" — is meant to demystify the cards, which are often referred to with such decidedly uncatchy labels as "general-purpose," "network-branded" or "stored-value reloadable."
"Obviously consumers many times don't understand what a GPR is. … 'General-purpose reloadable prepaid' just doesn't roll off my lip, and I'm in the business," Kelly said. "We really did try to say, 'What's the simple answer and the simple way to describe this product?' "
Executives at prepaid debit card companies and industry analysts have said the recession is broadening consumer demand for the cards, which can allow both underbanked and credit-deprived customers to pay with plastic instead of cash. A recent survey of prepaid card executives said many are wondering why the major payment networks, with their large marketing budgets and omnipresent television commercials, have done so little to mention prepaid in those ads.
Visa Inc. has run television spots for prepaid products in the past, but it is not currently running any such commercial and has no prepaid-specific television campaign planned, according to Hyung Choi, the San Francisco company's senior business leader for prepaid products.
"What we've done in the past, and we've done this for a couple of years now, is to run a very specific general-purpose reloadable spot in several key markets across the U.S., to drive awareness and to drive acquisition of the product," he said. "We will continue to evaluate the use of this tool to drive further awareness and education of the product in the marketplace, but that's going to be just one of the components."
Visa's current prepaid marketing strategy hinges on in-store and online promotions, such as signage or tax-time refund sweepstakes, with its partners, Choi said.
Kelly would not state other specifics about the MasterCard campaign's start date, cost or scope, except to say that it will be "multichannel."
"It's incumbent on all of us to make investments in the space," she said. "The majority of the spend on that card is kind of everyday spend. … The purpose is to actually focus on everyday prepaid and for people to connect the prepaid category with things that they use it for every day."
The March survey of executives from 21 prepaid companies by the Boston consulting firm Aite Group LLC said many such executives have been frustrated by the networks' lack of investment in television advertising.
The report, published last month, said 65% of respondents mentioned "education, awareness or demand cultivation" as one of the biggest challenges facing the prepaid industry.
"On the awareness front, a recurring theme is card networks' not doing enough to promote prepaid cards, in particular in their TV commercials, which highlight credit and debit but fail to mention prepaid cards," the report said.
Gwenn Bezard, a research director at Aite and the report's author, praised the MasterCard campaign in an interview and said it will earn a lot of good will — and potentially more business — from prepaid companies.
He predicted that the benefits of MasterCard's campaign will extend throughout the industry — perhaps even to its competitors.
"At the end of the day it's going to help generate higher awareness. From what we have seen, when you have those types of commercials, it's going to lift everyone," he said. "It's going to help Visa as well; I do think there is some halo effect, but from an overall competitive standpoint it can only make MasterCard a stronger brand."
Bezard said that he expects Visa eventually to follow MasterCard by introducing more prepaid-related commercials and said that the benefits to MasterCard of being first with such a campaign could be limited. "I'm stopping short of saying it might hurt Visa because prepaid is still small," he said. "You need a lot of transactions to make a difference."
Mick Conlin, the senior vice president of agent products at Meta Payment Systems — a unit of Meta Financial Group Inc. that helps other financial institutions market the prepaid cards issued by the Storm Lake, Iowa, company's MetaBank — welcomed news of MasterCard's planned television campaign.
"Additional exposure for the industry is fantastic, and I think it's a sign that the industry's grown up," he said. (MetaBank issues prepaid cards with the Visa, MasterCard and Discover Financial Services brands.)
Conlin said he does not blame the networks for not doing more sooner on television.
"Doing television is extremely expensive, and at this point in the industry's life cycle, [the question is still] whether or not the return is going to justify the expense," he said.
John Grund, a partner in the card-issuing practice at First Annapolis Consulting Inc., said that prepaid is "a pretty high-growth product for the networks. It's fairly high profile; it gets them in some instances access to a new class of customer that will eventually graduate into" users of more traditional card products.
But "in many respects, it is targeting a niche customer segment," he said. "The networks and the data might not support prime-time television advertising."
Jennifer Tescher, the director of the Center for Financial Services Innovation, a nonprofit affiliate of Chicago's ShoreBank Corp., agreed that the networks have the most power to help expand consumer awareness of prepaid cards.
"There are very few prepaid card providers who have the scale or resources to conduct the national campaign that would be needed," she said. "Another silver lining for the prepaid card industry with the current downturn is, with credit card volume down, it raises the profile of prepaid at the networks as a product to focus on to help make up for lost revenue."
Grund said he doubted that prepaid cards will ever be advertised at the mass-market levels at which the networks pitch credit and regular debit cards to consumers.
"Prepaid has specialized applications and a very targeted audience, whereas most of the networks' ads are creating a big reach," he said. "You might not turn on your television … during the Final Four and ever see a prepaid ad."
