Study: With Lower Fees than Checking, Prepaid Volume to Grow by $45 Billion in Next Five Years (May 13, 2013)
May 13, 2013
As fees on GPR prepaid cards go down, prepaid purchasing volume is expected to grow by nearly $45 billion over the next five years, from $150 billion this year, according to a new report by Javelin Strategy & Research. The study found that more than 13 percent of adults in the U.S. currently own a prepaid card, thanks to a rapid increase in prepaid penetration over the past three years—driven largely by lower costs of GPR prepaid cards compared to traditional checking accounts. In a baseline scenario comparing monthly fees, the study found that GPR cards cost an average of $6.89 per month, while the top retail bank checking accounts average $8.84 in fees per month.
Prepaid’s lower costs present a key opportunity for banks to offer prepaid products to their existing checking account holders, the report said. “Banks may find the optimal prepaid customer within their own walls as existing, underperforming checking account holders,” noted Aleia Van Dyke, a payments analyst for Javelin and an author of the report. “Despite the newer opt-in rules, overdraft behavior is most likely to make checking accounts too expensive for some consumers, and prepaid options enable banks to retain customers in a manner that is more satisfactory and cost-effective for both parties,” Van Dyke noted.
Javelin’s report was based on three online surveys of more than 11,000 consumers and an extensive review of popular prepaid cards marketed by banks and nonbanks.
