LAS VEGAS-The general consensus among attendees here at the Prepaid Card Expo is that the industry continues to grow, and consumers are becoming more comfortable using prepaid card products. But many also agree that, now that many prepaid products feature extras historically associated with credit and debit cards, the industry should do more to educate consumers, particularly the financially underserved, about the benefits the cards provide to achieve widespread adoption.
“[Prepaid card] sponsors are going to primarily focus on education,” Scott Scovel, general manager of financial services for Univision Communications Inc., told conference attendees Tuesday during a panel discussion. “We will be investing tens of millions of dollars to educate our consumers about the product.”
Univision last year became a significant player in the prepaid market thanks to an agreement with MasterCard Worldwide. The two companies announced a strategic partnership that involves cobranded gift and general-purpose prepaid cards. The gift cards are available now, and the companies expect to launch the general-purpose card later this year.
As the nation’s largest Spanish-language media company, Univision has the potential to influence and educate nearly 50 million Hispanics living in the United States. “If there is a more knowledgeable consumer out there, then we will see more card sales,” Scovel says.
Consumer education also is important within the Hispanic community because “this segment of the population is used to being taken advantage of,” Scovel added. “Education builds trust, and that will be really helpful.”
Education also should extend to affluent consumers, panel participants agreed. “Prepaid will play a much broader role beyond just the unbanked and underbanked,” said panelist Hyung Choi, head of consumer prepaid products for Visa Inc.
Trust will be a “key factor” in increasing adoption, Choi said. “To drive that trust is a critical part of creating product stickiness with consumers,” he added.
Some panelists believe consumers already find prepaid products trustworthy, but the industry needs to continue to spread that message. “In the next two to three years, we’ll see adoption grow as more consumers trust the products,” said panelist Neil Dugan, MasterCard vice president of global prepaid product.
Innovation also will help increase adoption, a theme that continued from last year’s conference in Orlando, Fla. A discussion about prepaid cards with a savings account feature yielded differing opinions, however.
“Savings is a great idea and makes a lot of sense, but the first priority should always be debt reduction,” Scovel said in response to an attendee question. “Prepaid tools [are helping consumers] prevent the overspending on credit cards and overdrafting of bank accounts.”
Prepaid savings programs remain rare with prepaid cards. Last year, FSV Payment Systems Inc. launched a savings account for holders of its PaycheckPLUS payroll and general-purpose reloadable cards. The program is designed to assist unbanked and underbanked consumers in particular who lack a convenient way to save for near and long-term financial goals.
NetSpend Corp. first introduced a prepaid card savings plan in 2005.
Last year, the Center for Financial Services Innovation, an affiliate of ShoreBank Corp. in Chicago, published survey results in which industry executives cited rewards, savings accounts and credit-building as the top features they would consider adding to prepaid cards.
Choi believes savings “is an important tool for [financially underserved] consumers.” However, the prepaid card has become a savings mechanism of sorts in that consumers add value to them to save for long-term purchases, he added.
