ORLANDO, FLA.–Companies increasingly are using prepaid debit cards as an incentive to drive customer loyalty and to reward employees, and merchants are benefiting because consumers generally are spending more than the value loaded into their card accounts, according to new research commissioned by Total System Services Inc., or TSYS.
Retail TouchPoints and Decision Tree Labs conducted the January online survey of 430 consumers on behalf of TSYS, which on March 7 revealed the study results here at the Prepaid Expo USA conference.
How respondents received the card did not affect their spending patterns, according to survey report. Some 51% of respondents who received a prepaid card to support a rebate spent more than the card’s value. Moreover, 41% who received a card as an employee incentive spent more than the card’s value, while 43% who received one as consumer incentive (contest or promotion) or reward did so, the survey found.
Overall, nearly 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, told PaymentsSource during an interview before the study’s official release. “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 suggest. While 30% of respondents preferred to receive open-loop cards, 25% preferred to receive checks, and 15% favored receiving closed-loop cards, merchandise or gift certificates.
The high check preference “was more than we were hoping to see,” Boyer said. That figure was likely a result of the study’s age demographics; some 26% of respondents were consumers ages 55 and older. “Their level of comfort is still with the check,” Boyer said.
Many consumers waste little time spending the card’s funds, the survey data suggest. Some 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. Respondent making $60,000 per year had significantly higher card activity than did those with lower incomes. Some 46% of respondents earning between $60,000 and $100,000 have received and used prepaid cards, while 37% of respondents 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 suggest. Some 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.
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