It's an exciting time to be in fintech. Startups and established companies alike are creating innovative new tools to help consumers attain financial independence and build wealth. But for the 9.6 million U.S. households without access to a bank account, and the additional 25 million households who are underbanked, financial independence can seem like a daunting, if not unreachable, goal. However, there is good news--every day, we're seeing new products come to market which make it a little bit easier to manage, save and grow money.
Enter general purpose reloadable (GPR) cards. These are network-branded (think Visa, Mastercard, Discover, etc.), reloadable prepaid cards that can be refilled either with cash or via direct deposit. Fifty-five percent of households that used prepaid cards in the last 12 months were unbanked or underbanked. According to KPMG, the underserved market represents nearly $1.3 trillion in wages, meaning that there are huge opportunities for fintech innovators to service these customers.
Here are the top five reasons why prepaid cards have huge potential as a pathway to financial inclusion.
Prepaid Cards Provide Many of the Same Benefits of Bank Accounts
GPR prepaid cards are not phone cards or gift cards. The only differences between GPR and traditional credit or debit cards is that they do not need to be linked to a bank account, and they require no proof of credit history. Prepaid cards can be spent anywhere debit and credit cards are accepted--including on-line. And in many cases, they can be used to withdraw cash from an ATM, or skip the ATM and get cash-back in the grocery line using a card like the MoneyTrac Prepaid Discover Card.
Prepaid Cards are Safer than Cash
Prepaid cards offer a wide range of benefits that, traditionally, you could only get through a brick-and-mortar bank. Above all, you are 100% protected from liability against fraud on your prepaid card--just like you would be using a conventional debit or credit card. Many prepaid cards, like PayPal's Prepaid MasterCard, allow you to set up free text-message notifications for suspicious activities so that you can receive alerts on your phone. These layers of compliance and fraud protection make prepaid cards a much safer alternative to carrying wads of cash around in your wallet.
It's Easy to Add Value
To activate most GPR prepaid cards, all you need to do is transfer funds onto them and they are ready to use. Consumers can purchase reload cards from a retailer kiosks and use a pin to add the funds to their account, either on-line, via mobile or by calling a 1-800 number. Some cards, including InComm's MyVanilla card, offer a convenient "swipe load" option, where the user simply presents cash at a participating retailer, who swipes the consumers' card to add funds on the spot. For the majority of prepaid cards, you can even arrange to have your paycheck deposited directly onto your card, eliminating the need for cash altogether. TSYS's Netspend Skylight PayOptions GPR solution not only empowers consumers without traditional banking services, but also helps employers achieve a paperless payroll, cutting down on expenses and saving time.
Prepaid Cards Are Mobile-friendly
In most cases, consumers can access prepaid products through their mobile phones. A growing number of entrepreneurs are seizing on the opportunity both to improve the financial services experience for the underserved and to expand the mobile pay business model. Some of the biggest players in the industry are already working on mobile solutions that don't require users to have a bank account. For example, American Express' Bluebird has mobile check deposit and bill pay services.
Prepaid Cards Are Great Budgeting Tools
Many prepaid cards, including Blackhawk Network's PayPower reloadable Visa card, allow you to view your balance online and see what you're spending, which makes it much easier to set a realistic budget and stick to it. It's easy to spend five dollar bills here and there on small purchases, but these add up--simply being aware of your spending can help you rein in unnecessary expenses.
Empowering people to save lays the groundwork for financial stability and independence. Increasing financial inclusion for these households is a critical first step. Prepaid cards are just one path to financial inclusion, but they're a great option for the millions of people who would otherwise lack access to financial services altogether. By increasing digital financial services availability to underbanked people, we are connecting them in the global marketplace and reducing the threat of theft and corruption that comes with heavy reliance on physical assets.