Banks Targeting Lucrative Prepaid Debit Card Market
In the four years since the financial crisis, some of the largest U.S. banks have offered prepaid debit cards in order to tap the underbanked consumer market as well as recoup billions lost to stricter financial regulations such as Dodd-Frank. A loophole in Dodd-Frank allows banks to impose high fees on retailers when customers make prepaid card payments. Mercator anticipates that U.S. consumers will put $202 billion on reloadable cards in 2013, and that the $57 billion prepaid industry will expand at a 42 percent annual rate from 2010 to 2014. Aite Group reports that large banks are gaining a bigger piece of the prepaid market by leveraging their existing pool of customers, at a much lower cost than more entrenched players such as Net Spend and GreenDot. Prepaid card operators are sometimes less than forthcoming about their fees, and consumer proponents say federal guidelines being developed by the Consumer Financial Protection Bureau to regulate the prepaid industry should mandate standardized fee disclosure. “The extent that people are choosing prepaid over checking raises questions about how banks are marketing these cards and how hostile bank accounts have become to low-income people,” says the Neighborhood Economic Development Advocacy Project’s Deyanira Del Rio.
From “Banks Barreling Into the Prepaid Debit Card Market”
Washington Post (04/11/13) Douglas, Danielle