Consumers Pull Back on Buying Prepaid Cards, Survey Finds

Prepaid cards are still popular with Americans, but not quite as popular as in some recent years, according to new findings from Mercator Advisory Group Inc.

A Mercator online survey of 3,011 U.S. adults in June found that 56% of respondents had purchased a prepaid card in the preceding 12 months, the same level as in 2014. A similar survey in 2016 found that 63% of respondents had purchased a prepaid card over the year prior. Some 61% of respondents had done so in 2015 and 56% in 2014. In 2013, 53% of respondents reporting having purchased a prepaid card.

Retailer-specific prepaid cards continue to be the most popular type of prepaid cards, having been purchased by 38% of adults in the past year, down from 45% in 2016. Fewer consumers bought prepaid cards in any of the eight categories tracked in the annual prepaid market survey, which besides retailer cards includes general-purpose reloadable (GPR) cards, general-purpose non-reloadable cards, gift cards for online services, prepaid mobile phone cards or virtual cards, long-distance phone cards, and transit cards. GPR cards did show less volatility than other types of cards, Maynard, Mass.-based Mercator said.

Much of the prepaid market’s growth has come from young adults, particularly 25- to 34-year-olds, as well as mobile-phone users, high-income adults, and Hispanics, according to Mercator, but these segments are among the most likely to have shied away from prepaid this year. One possible reason is the “flux in the retailer segment” and the growth of e-commerce and mobile commerce, Mercator said. Merchants have closed hundreds of physical stores in the past year, leading to fewer places to buy and use prepaid cards. Meanwhile, new digital-payment alternatives often involve regular bank cards.

“The recent dip in prepaid buying recorded by the latest CustomerMonitor Survey is a signal that [prepaid card] issuers should beware and increase accessibility of their cards online and by mobile, given that prepaid cards lock in spend, foster loyalty, and generate significant incremental spend,” report author Karen Augustine, manager of primary data at Mercator, said in a statement.

One major prepaid card provider, Green Dot Corp., reported that its active card count actually grew 20% year-over-year in the second quarter to 5.15 million But Green Dot, which has been growing by acquisitions, such as its February buyout of UniRush LLC, said second-quarter organic growth in its active card portfolio was a negative 1%. The company is looking to spur growth in part by getting more consumers to sign up for direct deposits to their prepaid accounts.