Viewpoint: Optimizing the Prepaid Experience with Robust Mobile Offerings

By Youri Bebic, Cachet Financial Solutions

Growth in prepaid GPR and payroll cards today exceeds that of all other noncash forms of payment, but stickiness remains a problem for issuers and program managers. An analysis in 2012 by the Federal Reserve Bank of Philadelphia found the typical consumer uses a reloadable, open-loop prepaid card for an average of six months before ditching it for another prepaid card or another payment method altogether.

Adding mobile access and other financial tools to the mix—such as check deposits with instant good funds and expedited bill pay–makes prepaid a compelling proposition for consumers and providers alike.

Studies show that unbanked and underbanked Americans—a key market for prepaid providers—are more apt to have smartphones than the population at large. In fact, consumers with cell phones outnumber those with bank accounts in at least eight states, according to the Center for American Progress. By using the mobile phone as a channel to deliver more products and services, prepaid providers are more likely to hold onto their customers longer. After all, the more products and services a customer procures from a provider, the less likely he is to take his business elsewhere.

We also know the financial lives of today’s consumers are anything but simple. This is especially true for the unbanked and underbanked. Many of these consumers are young adults—we like to call them millennials—who value speed, convenience and mobile access above all else. Bank branches are too old school for these young people; they want the freedom to manage their financial lives when and where it works for them. Many others (young and old, alike) face uncertain incomes that don’t match their expenses, forcing them to purchase assorted products and services from various financial services providers to meet their daily needs and make ends meet. Combining prepaid with mobile financial services begins to address the unique and complex requirements of these consumers by offering everything they need in one place.

A recent Pew Charitable Trusts consumer survey found that 25 percent of prepaid cardholders had used check-cashing services during the previous 12 months. Pew also found that 58 percent of those prepaid cardholders who did not have checking accounts aspire to have checking accounts. Mobile services appeal to these consumers and mobile is an inexpensive delivery option for prepaid card issuers. A 2012 survey by the Federal Reserve revealed that 49 percent of underbanked consumers with mobile phones used those devices to access financial services during the previous 12 months; nearly a third had used their mobiles during that same period to make payments.

Mobile Game-Changer

Mobile access is changing the way people think about financial services, prepaid cards included. It’s not simply fashionable for prepaid card companies to deploy mobile strategies.

In today’s competitive marketplace mobile functionality has become an imperative for growth. Successful companies are positioning mobile prepaid offerings as stepping stones to deeper, and stickier, customer relationships.

We live in a mobile society with near universal adoption of mobile telephones in developed and developing countries. Younger adults are especially enamored of mobile banking functionality, although use of mobile banking is also on the rise among their elders. The Fed found that 73 percent of consumers who reported using mobile financial services in 2012 were between the ages of 18 and 44; about one in five was between the ages of 45 and 59. The most popular services were checking account balances, transaction inquiries and transferring funds between accounts; more than half those surveyed by the Fed had used their mobiles for each of these activities. Other popular services include online bill payments, locating in-network ATMs and remote check deposit.

Remote check deposit using mobile devices is becoming a functional necessity in financial services because it enables customers to deposit checks on their terms: when and where it makes sense for them. This is true not just for retail consumers but for business customers too, especially small businesses. Combining the functionality of mobile deposits with the practicality of reloadable prepaid cards creates exciting opportunities for prepaid providers. It spurs growth in non-interest-bearing deposits and creates new fee revenue opportunities.

It also offers an inexpensive platform from which to offer a full suite of sophisticated services that enable consumers to better manage their financial lives. Add powerful analytics to the platform and issuers have the ability to further engage customers by monitoring customers’ mobile app usage, segmenting customers based on similar behaviors (use of mobile deposit, bill pay, etc.) and sending customers push notifications with relevant marketing offers linked to their behavior.

Being able to access cash and perform other basic financial activities anytime, anywhere, can significantly improve the lives of millions of consumers, including the unbanked and underbanked. Financial services firms that address this demand with robust mobile prepaid solutions can expect tangible rewards, including stickier and more profitable customer relationships.

Youri Bebic is senior vice president of mobile innovations at Cachet Financial Solutions.He has more than 16 years of experience in prepaid banking, mobile payments and telecommunications in the U.S., Europe and South America. He is fluent in English, Spanish and French, and has a master’s degree in international business. Youri can be reached at [email protected].