Help Wanted: Wizards in Prepaid Card Marketing and Branding

Regulatory pressures, the public’s lack of awareness of prepaid cards, and negative publicity from consumer groups and the media are weighing on prepaid card executives’ minds, according to new findings from Aite Group LLC.

Researchers from Boston-based Aite polled 24 senior executives during March’s Prepaid Expo USA conference in Orlando, Fla., and asked them to rate their concerns about 10 issues on a scale of 1 to 5, with 1 for not at all important to 5 for very important. Regulatory pressures scored at the top with 4.6.

That’s not a surprise considering all the new or proposed regulations on prepaid cards, including the Dodd-Frank Act and its Durbin Amendment that, while exempting general-purpose reloadable (GPR) prepaid cards and government prepaid cards from debit card interchange controls nonetheless has spurred fears that the effects of regulation could spill over into the unregulated sector. Another new force is the CARD Act of 2009 that put controls on gift card fees. Then there is a proposal from U.S. Sen. Robert Menendez, D-N.J., which would add still more regulations, not to mention increasingly aggressive state efforts to regulate prepaid cards.

Almost as bad is what prepaid card executives perceive as the diffuse image of their industry and products, which Aite terms “market awareness.” That problem scored 4.0 to rank No. 2 on the list of “challenges,” as Aite termed it. People know what credit and debit cards are, but they’re not very clear about prepaid cards, according to Aite analyst Adil Moussa. That’s especially true for GPR cards, one of the prepaid card industry’s fastest-growing niches. “Market awareness is something that still surprises me because I don’t think any player has really found a way to stand out,” Moussa tells Digital Transactions News. “There is not one word that can describe it well.” The term “GPR,” he adds, needs a catchy phrase that will create a strong image in peoples’ minds. “GPR doesn’t do it; it’s not a brand. I think people need a brand.”

And when the public does think of prepaid cards, it’s often in a negative context after a media or consumer-group report criticizes the cards’ fees. Advocacy groups and the media scored a 3.6 to rank third on the list of challenges. Aite’s report cited the debacle of the Kardashian Kard, a high-fee card bearing the name of reality TV’s Kardashian sisters and aimed at teens and young adults, as an example of an incident that could add to negative perceptions that all prepaid cards carry very high fees.

The other seven challenges and their rankings were lack of scale, 3.2; the limited number of partners or distributors that could add scale to card portfolios; lack of product innovation, competitive pressures, and lack of processing system flexibility, all 2.8; lack of processing system reliability, 2.7, and other technology issues, 2.6.

Despite their worries, industry executives see considerable upside for many of their products. Asked to rate growth prospects for nine prepaid categories, the respondents gave top billing to GPR cards for unbanked and underbanked consumers, with a score of 4.5 on a scale of 1 for very weak to 5 for very strong. Government benefits cards and payroll cards were close behind at 4.2 and 4.0, respectively. Next were GPR cards for average consumers, 3.6; consumer-incentive cards and health-care cards, both 3.1; corporate-incentive cards, 3.0; gift cards, 2.8, and teen cards, also 2.8.

Aite also asked some “peer review” questions. Asked how impressed they were by the strategies of 11 reload networks on a scale of 1 (not at all impressed) to 5 (very impressed), respondents gave their best marks to Green Dot at 3.8, followed by NetSpend, 3.2; Visa, 3.1, and Western Union, 3.0. Next came MoneyGram, 2.8, InComm and MasterCard, both 2.7; Blackhawk Network, 2.5; i2c and First Data, both 2.1, and Discover, 2.0. Respondents also ranked Green Dot and NetSpend well above the pack for strategy and execution by program managers.

Asked how they would rate the four major card networks’ prepaid card execution and strategy on the same scale, respondents gave Visa a 3.7; MasterCard, 3.3; American Express, 2.6, and Discover, 2.3. Among 16 processors, respondents gave top marks to TxVia, 3.5, with NetSpend close behind at 3.4.

And asked to name one to three prepaid card-issuing banks that have shown effective strategy and execution in the past year, 52% of votes went to The Bancorp Bank, far more than any other issuer. Next were MetaBank, BB&T, Citibank, and H&R Block, each garnering 7% of responses. Moussa says The Bancorp Bank played conservatively and avoided the micro-lending problems that got rival MetaBank into regulatory trouble, but still “hooked up with some significant players” and showed innovation with such products as cards for insurance disbursements.