Prepaid card marketing is on the rise as the major card brands set their sights on new markets and opportunities for growth to counter legislative and regulatory changes constraining their ability to grow their more traditional debit and credit card products.
Indeed, prepaid is “in,” both from a greater emphasis in promotional spending and from card use in general. Still, promoters of prepaid cards face challenges.
Two research firms, Kantar Media Intelligence and TowerGroup, earlier this year indicated in separate reports that card companies are increasing their focus on the prepaid market, including on advertising spending,
Ad spend to promote prepaid card products during the first few months of this year accounted for 11% of total payment card ad spend, up from 3% during the same period in 2010, according to Kantar. The Univision Communications Inc. MasterCard prepaid card, which targets the Latin American segment, made the biggest push in prepaid advertising, according to Jon Swallen, Kantar senior vice president of research.
MasterCard expanded its marketing relationship with the Spanish-language media giant, which operates television, radio and online programming in the United States, earlier this year by featuring Mexican singer and songwriter Paty Cantú (see photo) in a new MasterCard “Priceless” television commercial that showed her using a cobranded Univision card in different situations (
Prepaid card load volume in 2012 will reach an estimated $350 billion, according to TowerGroup. In its report Business Strategies for Credit Card Issuers to Address New Regulation and Increase Profits released earlier this year, the research company recommended that card issuers develop products, such as prepaid cards, that target cash and other segments, such as payroll, family budgeting, health care, travel and the underserved market.
Neither Visa Inc. nor MasterCard would disclose their ad-spend budgets for prepaid, but the payment market is making a significant push to take advantage of a burgeoning consumer segment that may benefit from prepaid cards.
Visa has been supporting marketing designed to educate consumers on how they can benefit from prepaid cards, such as by having direct deposit and access to electronic payments for online and in-store shopping, Kevin Burke, the card brand’s head of global marketing and strategy, tells PaymentsSource.
“The headline for us is that we’re investing more time and energy in supporting our prepaid business across the board, and the reason is we see a very big opportunity in this category to give consumers who may not have access to electronic payments a way to enjoy those conveniences,” he says. “Many of those consumers are more reliant on cash, and there many things they would like to do that a Visa prepaid card can enable them to do, such as shop online, pay bills online and have direct deposit.”
Visa is running an extension of its “More People Go With Visa” marketing campaign called “Go Open A New World” with Visa prepaid cards. The campaign combines traditional television, digital video, radio and outdoor ads, point-of-sale signage and a “tremendous amount of social media,” Burke notes. Visa’s prepaid section on Facebook has 79,000 “likes” and features consumer testimonials on how prepaid cards help them “Go with Visa.”
“The testimonials very simply underscore how those consumers can do the things they do and want to do with Visa prepaid cards,” Burke says.
Visa also has done more specific marketing events to reach consumers who may benefit from prepaid cards. Over the July 4 holiday weekend, it sponsored the Essence Music Festival in New Orleans (
Essence magazine’s festival featured African-American artists, such as Usher, Jennifer Hudson, Boyz II Men and Fantasia. Connecting Visa with this segment through a music festival establishes trust and is a good tactic for getting consumers to try its financial products, says Leylha Ahuile, senior multicultural analyst at Mintel Comperemedia, who has written reports about cultural groups and their attitudes about financial services.
MasterCard generally follows an educational strategy to encourage underserved consumers to use prepaid cards to help manage finances and make purchases online, Alex Liu, the card company’s vice president of global prepaid solutions, tells PaymentsSource.
“We lead with education because we feel like it’s a really complex topic, and traditional marketing methods aren’t going to work quite as well regardless of the audience if they don’t understand the prepaid product concept and its inherent benefits,” he says.
MasterCard also follows a multicultural strategy to promote products that encourage unbanked consumers to use cards, also referred to as financial inclusion (
In its latest promotion, MasterCard is targeting the Gen Y segment of consumers, generally born after 1980, to promote that financial inclusion, Brett Adams, MasterCard lead for U.S. prepaid products, tells PaymentsSource.
MasterCard on July 7 unveiled “Get Loot,” a promotion offering new prepaid customers free movie tickets and opportunities to win a trip to a 2012 movie premiere (
“This segment is very engaged with movies, and the timing is right for summer blockbusters,” Adams says.
MasterCard is running the “Get Loot” promotion with Western Union, which sells MasterCard prepaid cards in its stores, and NetSpend, which sells the cards online. Both companies are promoting the cards and ticket giveaway on their respective websites.
The card brand also has a tab on its prepaid products Facebook page, and it placing some marketing emphasis on general Gen Y-targeted sites online, including Eonline, G4TV and Blitzcorner, Shekhar Sahgal, MasterCard vice president of prepaid products, tells PaymentsSource.
MasterCard also is tapping in on its major “Priceless” themed campaign for the promotion. Its online video short, which also runs as an ad during movie trailers at theaters, uses the tagline “Getting More Thrills Out of Life—Priceless.”
American Express Co. made a bold move in June by introducing a reloadable prepaid card that carries almost no fees (
Amex plans to garner additional transaction volume by appealing to a wider swath of consumers than the well-heeled credit and charge card customers with whom its brand has long been associated. Its entree into the prepaid market signals a shift in who prepaid companies are targeting in that cardholders may reload their Amex prepaid card accounts by connecting to a bank account.
“I like what Amex is doing [with its new prepaid card],” says Ron Shevlin, senior analyst at Boston-based Aite Group. “It’s a great way to attract and acquire customers who have not quite hit the curve of creditworthiness for preapproved credit cards. Amex is capitalizing on its brand name [with its prepaid product], and down the road these prepaid customers would become credit card customers.”
Some market analysts believe Amex will put pressure on other prepaid card marketers, such as NetSpend Holdings Inc. and GreenDot Corp. (
Indeed, prepaid marketers have their work cut out for them because explaining how the cards work in a short marketing message is challenging, says Ben Jackson, senior analyst with Mercator Advisory Group.
“One of the challenges for prepaid marketers is figuring out how to explain what this card is and how it works in a short [marketing message],” he says. “As prepaid cards get more ubiquitous, with more consumers running across them through government programs like unemployment or through affinity partnerships, then the education part will start to be less important and the real issue will be how to distinguish prepaid cards from other payment products.”
Indeed, prepaid marketing messages have come under scrutiny in certain markets.
Florida’s attorney general, for example, announced May 19 that she is investigating five prepaid card companies for their fee-disclosure practices (
Besides seeking information about “possible hidden fees” on prepaid cards, some subpoenas also request information about services that claim to improve consumers’ credit scores.
Traditional card-issuing banks might follow Amex’s prepaid model and consider adding prepaid to their product mixes in a post-Durbin amendment environment to find a way to bring more card revenue in, Jackson notes.
As card companies fine-tune their marketing messages, a more succinct formula may emerge to explain how prepaid cards can help consumers change their payment behavior. Then issuers will be able to reap the benefits of such a large projected market.
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