Consumer interest in pre-paid cards increases

Consumers might be willing to act on their dissatisfaction with banks and look for alternatives to their traditional accounts, according to a new report published by Mintel, the research company.

In Mintel’s recent survey, 19% of respondents overall stated they would be interested in using pre-paid cards to pay bills, rather than a bank account. More importantly, 25% of households earning more than $100,000 per year, the more profitable and desirable customers for banks, agreed they would be interested in using pre-paid cards. Their main motivation was to avoid overdraft and/or other types of banking fees.

“This is significant, because if banks were to lose mass affluent customers, it could have a considerable impact on their bottom lines,” said Susan Menke, vice president and behavioral economist at Mintel Comperemedia. “This means the traditional category of the ‘underbanked,’ previously characterised by lower-income households and recent immigrants, now has the potential to include individuals with higher incomes who are leaving their banks for less traditional ways of handling their financial transactions.”

Pre-paid card providers can incentivise customers, says Mintel. According to its study, approximately six in 10 people say they would be interested if a rebate or cashback were offered for using the pre-paid card and seven in 10 find purchase discounts at merchants to be an attractive offer.

“There are a number of trends that appear to be springing out of dissatisfaction with the banking system, and the use of pre-paid cards could be indicative of a larger trend – customers are becoming more open to using new or unfamiliar methods for conducting their transactions,” said Menke.

There is some good news for banks, however. Only 3% of survey respondents say they would prefer to have their salary loaded on a pre-paid card rather than direct deposit to a bank, cash or a cheque.