The Convergence of Prepaid and Fintech Means More Innovation to Come

By Brian Tate, NBPCA

Skim any financial news source and you will likely see multiple headlines touting the same thing: fintech. While that word may elicit sci-fi-like images of retina scans to buy flying cars, the reality is that critical advancements are being made across the payments industry to offer consumers unique ways to manage their funds and new features that increase efficiency.

The prepaid card industry has been leading that change in the payments sector since the 1990s and has grown substantially beyond its initial niche. Today prepaid cards are a critically important financial account alternative that enable broader consumer access to the digital economy. If you look closely at many of the fintech solutions out there, you’ll find a prepaid framework at their core. Prepaid innovation has both blazed the trail and laid the foundation on which many compelling payments solutions have followed. One of the benefits of prepaid is its flexibility. Although the two industries will continue to innovate independently, some of the most compelling solutions will be where the two converge.

Before the fintech investment market exploded, prepaid was creating a whole new branch of financial services products, expanding from a $157 billion industry in 2010 to a $295 billion industry in 2016 across all card types. Much of that growth started to take hold at the same time the CFPB began the process of developing new regulations for the prepaid card industry in 2012.

Despite the CFPB’s protracted rulemaking process, prepaid providers continue to develop new features that are popular across a variety of demographic groups, specifically millennials with incomes almost twice the national average. While there are still many areas for improvement in the prepaid accounts final rule, at a minimum the final regulation will set the rules of the road and allow the industry to focus more of its attention on evolving to better serve consumers, corporations and governments.

As the new president and CEO of the Network Branded Prepaid Card Association (NBPCA), I cannot wait to see what the future of the prepaid card industry looks like. NBPCA’s goal is to foster an innovation-conducive environment in which the industry—and its many partners—finds new and compelling ways to address the ever-changing needs of American consumers and businesses.

When prepaid innovates, we see the industry’s real value in leading the development of the next generation of payment products. It’s the natural progression the industry began when the first GPR card was sold on the j-hook. Innovations like cards geared toward small businesses or rewards like earning airline miles pave the way for other payment products to do the same. What all these varied solutions have in common is that when prepaid is involved, they expand the reach of digital payments and financial services.

As innovators at the forefront of payments innovation, prepaid companies will continue to find success by expanding their businesses and partnering with creative fintech startups or established businesses in other industries that want to include payment solutions as part of a broader value proposition. Prepaid is a powerful enabler of a vast expanse of other solutions—from payroll cards and government benefits disbursement to international commerce to safe online shopping to financial literacy for teens, to name just a few. Prepaid accounts are a critical part of the financial services ecosystem, and through innovation and growth, will continue to be important tool for millions of Americans and businesses for decades to come.

Brian Tate is the president and CEO of the NBPCA, a Washington D.C.-based nonprofit that advocates on the hill and beyond to share the benefits of prepaid to policymakers, media and consumers. He can be reached at [email protected].

In Viewpoints, payments technology professionals share their perspectives on the industry. Paybefore presents many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.