Prepaid

Overview
General purpose reloadable prepaid accounts hold a great deal of promise for underbanked consumers. These accounts function like electronic bank accounts without checks: consumers load funds on a prepaid card and can spend only what they load, limiting the risk of overdraft while providing immediate liquidity. In addition, many prepaid accounts offer special features such as bill pay, money transfer and savings wallets that provide both convenience and safety for account holders. For all of these reasons, prepaid accounts are an important product for the underbanked. The findings from CFSIs Underbanked Industry Scan paint a picture of the prepaid products currently on the market, providing new details on the range of features and functionality available to consumers. We asked respondents about product features, reload options available to consumers, consumer usage of prepaid, and fees charged for various activities. The participants in this survey include several of the largest players in the market today. Respondents include three of the four top prepaid providers and four of the top five banks in the U.S. We estimate that prepaid providers captured by the survey manage more than 6 million active prepaid cards. Although the sample size for this subset of questions on prepaid accounts is small, the entities represented provide a valuable snapshot of existing product offerings in the underbanked financial services market.

About the project:

In 2010, CFSI launched its largest effort yet to develop a comprehensive understanding of the quantity of financial products and services aimed at the underbanked population: the Underbanked Industry Scan. CFSIs Underbanked Industry Scan provides an objective snapshot of the market. Through a quantitative survey, issued to the entire spectrum of suppliers to the underbanked market, we sought to identify the range and character of services available. The information gathered includes new details about specific product offerings, provider results and customer usage of products. The underbanked financial services market is dynamic and evolving, and we hope the snapshot the Industry Scan represents will provide useful context for suppliers as they plan their strategies for the future. This is one in a series of knowledge briefs that offer a closer look at the productspecific findings from the Underbanked Industry Scan. This work was supported by the

The distribution of respondents to the prepaid section of the survey was as follows: Prepaid Program Managers: 45% Check Casher/Payday Lenders: 17% Banks: 10% Retailers: 7% Credit Unions: 3% Vendors: 3% Others: 14%

Participants

Key Takeaways

Among special featured offered, 66% of surveyed providers offer text alerts and online bill pay, while 38% offer linked savings accounts and only 10% provide linked credit features The median balance of active accounts is $276, and the median transaction size is $36 Providers offering a greater number of account features were more likely to report a longer duration of active account ownership Respondents think consumers choice of which prepaid product to buy is most impacted by the distribution channel used, low costs associated with the card, and convenience

Prepaid
Accounts Usage
Median number of months accounts are active: 8
9 8 7 6 5 4 3 2 1 0 0-4 5-9 10-19 20-29

Median balance of active accounts: $276

7 6 5 4 3 2 1 0 $0-199 $200-399 $400-599 $600-699

Median number of months accounts active (n=18)

Median balance of active accounts (n=16)

Average number of transactions per month for active account holders: 10

6 5

Median transaction size for active accounts: $36

7 6 5 4 3

Average number of transactions per month for active account holders (n=16)

Median transaction size, active accounts (n=14)

2
1

1 0
0 1-5 5-9 10-19 20-29 >=30

$0-24

$25-49

$50-74

$75-99

Fees
Median Activity Fees Card acquisition/activation fee: Monthly maintenance fee: Transaction fee: ATM withdrawal fee: Reload Fees Via direct deposit: Cash at retail: Check cashing: Electronically (not direct deposit): $0 (range $0-3) $2.50 ($0-5) $1.50 ($0-10) $0 ($0-4) $3 (range $0-10) $3 ($0-12) $0 ($0-2) $2 ($0-3)

Special Features Offered

Online and mobile services are fairly common among the prepaid providers we surveyed. Online billpay, text message alerts, and other online services are offered by more than half of respondents. In contrast, other features such as paper checks, rewards programs, credit, budgeting services, and overdraft protection are less common.

Copyright 2011 CFSI Kate Marshall, Innovation Analyst Rachel Schneider, Vice President, Innovation and Research