ORLANDO–Some banks see prepaid as an opportunity to attract new customers, but U.S. Bancorp has found that the cards also are popular with many existing customers.
About half of the individuals using U.S. Bank’s prepaid card already have a relationship with the bank, according to Kevin Morrison, senior vice president of the bank’s prepaid division. That figure does not take into account prepaid card customers who have accounts at other banks.
“We’re finding half the people who take our [general purpose reloadable] card are already banked, and they’re utilizing it for other purposes which run the whole gamut,” from budgeting efforts to travel-related expenses, Morrison said in an interview at SourceMedia’s annual Card Forum and Expo last week. SourceMedia publishes PaymentsSource.
Also during the conference, data from prepaid specialist The Bancorp Inc. suggested some banks are missing out on a large opportunity to offer prepaid cards to potential customers who don't qualify for traditional checking accounts (
Nonbank companies, including Wal-Mart Stores Inc., generally sell reloadable prepaid cards, which many insiders generally considered a product for underbanked consumers who don’t have or don’t regularly use bank accounts.
But now banks increasingly are getting into the market. Several large banks, including JPMorgan Chase & Co. and Regions Financial Corp., have launched reloadable prepaid card programs in recent months to gain more business from the estimated 60 million underbanked Americans.
Prepaid cards are generally also exempt from recent regulations on debit card interchange fees, making them potentially more lucrative for the banks that offer them.
Since U.S. Bank unveiled its reloadable card in November, existing accountholders and new customers have been using the cards in a number of ways, including for travel and to help stay on budget, Morrison said.
Though the bank expected some existing customers would start using the prepaid card, Morrison said he was surprised by how many did: “The percentage threw me,” he said.
Existing accountholders may be using U.S. Bank’s prepaid card because they can load cash at branches for free, Morrison said, noting bankers and tellers participating in the bank’s product development supported the decision.
“Telling them to offer reloading in the branch and then [charging] for it was kind of a reach,” he said. “That was a key point in the development of it.”
U.S. Bank is still focused on bringing in new customers with its prepaid card.
“This is about establishing relationships with new customers and strengthening existing relationships,” Morrison said.
Banks have an advantage over nonbank prepaid providers in terms of attracting and keeping customers, in part because when consumers “walk into a financial institution they are there to conduct financial business,” he said.
Unlike at Wal-Mart or other competitors, consumers “are not there to pick up a pair of jeans and a loaf of bread,” and so retention “is so much stronger already” at U.S. Bank Morrison said.
Other banks are also offering incentives to existing customers who use their prepaid products. For example, Chase’s new prepaid card has a $4.95 monthly fee that can be waived only if a consumer links the card with a checking account (
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