Most prepaid cardholders are content with their cards, with nine out of 10 customers "extremely" or "very" satisfied with their prepaid cards. However, issuers could do more to keep customers for the long haul, research suggests.
The prepaid debit and payroll card market will total $105 billion in value loaded into accounts by 2014, up from $24 billion in 2009, according to an Aite Group LLC report released June 30. For its research, Aite in February and March surveyed 500 U.S. consumers based on their use of alternative financial services, such as prepaid cards, payday loans and check-cashing services.
Nine out of 10 existing prepaid customers said they were "extremely" or "very" satisfied with their prepaid cards, but many past and present cardholders did not view prepaid cards as a long-term service. Eight out of 10 former prepaid card users said they saw the product as something only for short-term use, and six out of 10 existing prepaid customers expressed a similar view, the survey found.
"So that's a warning sign for prepaid card issuers that, even among the more loyal and satisfied customers, only a minority see it as a long-term" service, Ron Shevlin, the report's author and an Aite senior analyst, said in an interview.
The report suggests that issuers offer incentives for long-term use with loyalty and reward programs.
In the study, Aite explored four customer segments: existing prepaid cardholders, former cardholders who at some point used a card in 2010 but not in the fourth quarter, payday loan borrowers and check cashers. Participants were asked how they perceived prepaid cards and what types of extras they would like to see, such as savings accounts and paper checks. At 15% of respondents, payday loan borrowers were the least likely to view prepaid cards as a better alternative to a checking account. But nearly half, 48%, saw it is as a better option than a credit card, which Shevlin said provides hope to issuers that they could penetrate even that checking-entrenched market. "Clearly it's a minority, but there's still an opportunity to target payday loan borrowers," he said.
Another of the report's suggestions is that issuers position prepaid cards as a long-term alternative to a checking account and that they give potential customers realistic expectations of what they would receive with a particular prepaid card.
Only 14% of former cardholders surveyed described themselves as "extremely satisfied" with their prepaid cards, and Shevlin said he believes they may have had mistaken expectations, such as credit-building services or a savings account option. He suggests that issuers offer alternative card versions that include such perks or services to win back former customers and broaden the appeal for new customers.
"It seems to us like there's a really big opportunity to make prepaid cards a much more mainstream product," Shevlin said.
