Millennials Leaning on Prepaid through Economic Recovery (March 25, 2013)
The U.S. economy’s slow recovery from the recession is driving millions of consumers between 18 and 34 years old to use prepaid cards as an alternative to a traditional bank account, forcing banks to rethink how they market financial services to young adults, various experts suggest. And as underemployed young adults in the so-called Millennial generation continue to lean on prepaid cards, the trend is becoming entrenched with young adults accounting for a high proportion of prepaid cardholders. One reason is the stagnant job sector, according to Phil Valvardi, general manager of prepaid solutions at Fiserv. “Many millennials are unable to find a full-time position in their desired field,” Valvardi says, and prepaid cards are serving as “a replacement to the traditional checking account” for young people in transition.
A key problem is that for many young adults without a steady income, it is difficult to maintain the minimum average daily balance required for a traditional checking account, Valvardi says. Prepaid cards enable Millennials to “closely track their finances, save money and avoid accumulating credit card debt,” he explains. Financial institutions have an opportunity to capitalize on these trends by devising prepaid card programs that “allow parents to monitor their children’s spending” and gradually help young adults gain control of their own finances. “The payments industry is already tapping into the characteristics of this generation and financial institutions must continue to do so to further grow market share with Millennials,” he says.
