Prepaid – it's complicated

Value propositions for various prepaid cards are relatively simple. Some cards offer money management tools for financially strapped families while other cards allow people without access to debit or credit the ability to purchase goods and services online. But, behind the scenes, prepaid is complicated.

Take for example banks. It is ironic that banks are now adopting prepaid card programs to attract the very customers they pushed away to prepaid card providers in the first place. In the 1205A edition of SellingPrepaid E-Magazine, the first article offers insights from the co-founder of MyBankTracker.com into how banks are going about that delicate courtship.

Next, municipalities and mass transit authorities recognize the efficiencies inherent in "open" mass transit payment systems. After all, letting riders pay for fares with the same debit and credit cards they use every day reduces headaches for transit agencies. But the agencies would strand large percentages of their riderships if they didn't include prepaid cards in their mass transit equations. However, prepaid cards add complexity to already complex systems. A report issued by the Philadelphia Fed's payment card center highlighted one problematic but necessary aspect of prepaid for mass transit: customer support.

Banks seek relevance with prepaid

According to bank comparison website MyBankTracker.com, banks ignore the unbanked and underbanked at their peril. If banks are to sustain profits in a stricter regulatory environment and reach previously shunned consumer segments, they should turn to the one product that delivers results on both fronts: prepaid cards.

Customer support's centrality to open transit payments

Large North American cities and their corresponding transit agencies are moving toward "open" transit fare payment systems. Salt Lake City, Philadelphia, Washington, Chicago, New York and Toronto are all developing mass transit systems that allow riders to pay for fares with the same credit, debit and general purpose reloadable (GPR) prepaid cards they use for everyday purchases.

But an August 2011 workshop at the Payment Cards Center of the Federal Reserve Bank of Philadelphia detailed why the GPR card components to transit programs generally constitute the most complex pieces of the puzzle. The April 2012 case study that resulted from the workshop concluded that prepaid's additional complexity is a product of the number of additional service providers involved in the prepaid value chain.

Prepaid in brief

A concise, up to the minute update on what is happening in the prepaid world.