ORLANDO, Fla. — Companies that use prepaid debit cards to drive customer loyalty and reward employees are also benefiting merchants, which have seen increased spending as a result, according to Total System Services Inc.
That's because consumers typically spend more than the value loaded on prepaid card accounts, research commissioned by TSYS showed.
Retail TouchPoints and Decision Tree Labs conducted the January online survey of 430 consumers on behalf of TSYS, which released the results Monday at the Prepaid Expo USA conference.
How respondents received the card did not affect their spending patterns, according to the survey. About 51% of respondents who received a prepaid card to support a rebate spent more than the card's value.
Forty-one percent of consumers who received a card as an employee incentive spent more than the card's value, while 43% who received one as a consumer incentive or reward did so, the survey found.
Overall, about 90% of respondents said they were familiar with prepaid cards.
"A lot of the growth has to do with the product's efficiency as well as the consumer continually being more exposed to these cards," Rod Boyer, TSYS' president of loyalty and prepaid, said. "The more familiar consumers are with prepaid, the more comfortable they are using it."
But consumers still like to receive checks as an incentive, the survey data suggested. While 30% of respondents preferred to get open-loop cards, 25% favored receiving checks and 15% preferred closed-loop cards, merchandise or gift certificates.
The high check preference "was more than we were hoping to see," Boyer said. That was likely a result of the study's age demographics: about 26% of respondents were 55 and older.
"Their level of comfort is still with the check," Boyer said.
Many consumers waste little time spending a card's funds, the survey data suggested. About 30% of respondents typically use their card within the first four weeks of receiving it, while 25% use it within the first week.
"We do think there is some level of expectation that consumers have earned that reward and, therefore, are going to redeem it" quickly, Boyer said.
Consumers with higher income levels are more experienced with prepaid cards, the survey found. Respondents making $60,000 per year had significantly higher card activity than those with lower incomes. Roughly 46% of respondents earning between $60,000 and $100,000 have received and used prepaid cards, while 37% earning between $31,000 and $60,000 have received and used them.
Respondents with higher salaries were aware of prepaid cards as incentives because they are exposed to the product based on the "very nature of their work and the very nature of who they are as consumers," Boyer said.
Consumers also are willing to perform certain activities to receive a prepaid card, the survey data showed. About 89% of respondents said they would complete an online survey for a $25 card, while 29% would post a favorable product review on a social network for such a card and 14% would provide e-mail addresses for five friends.
Consumers favored receiving rebates on prepaid cards instead of traditional methods, which the study said are "unwieldy and expensive" to redeem.
This represents a "prime opportunity to reduce mailing and printing costs of checks and paper certificates" companies have relied upon in the past, the study said.
