Prepaid Cards: Power Users and Potential Impact of the CFPB

As prepaid cards continue to be targeted toward millennials and underbanked consumers, their usage and how they are marketed are changing. This report examines how the cards are acquired, reloaded, and used by key consumer segments. It also examines the CFPB’s proposed changes to prepaid that could change the attractiveness of these cards.

The market for prepaid cards continues to evolve. Selected merchants and online prepaid vendors have been increasingly targeting underbanked consumers with the cards, and banks have used them to onboard younger consumers and the unbanked. As online shopping continues to grow as a percentage of total retail sales, general purpose reloadable (GPR) prepaid cards are finding new uses, in addition to their traditional spend categories. In this report, Javelin examines where consumers obtain prepaid cards and where they tend to reload them. Also covered are the growing importance of merchants in the overall prepaid card market.

Key questions addressed in this report:

• From whom do most consumers acquire prepaid cards?
• Which types of banks are most likely to offer prepaid cards to their customers?
• What do consumers typically use their prepaid cards for, i.e., what do they spend with them?
• How much do consumers typically reload onto their prepaid cards?
• Where do they typically reload them?

Companies Mentioned: 7-Eleven, American Express, CVS, Green Dot, Kaiku, Navy Federal Credit Union, Visa, Walmart, WildCard System

The consumer data in this report is based on information collected from several Javelin surveys that targeted populations representative of the overall U.S. population in proportions of gender, age, and income:

• A random-sample panel of 3,200 respondents collected online during November 2015. The overall margin of sampling error is +1.73 percentage points at the 95% confidence level.

This report examines consumer behavior based on three segmentations by generation as well as two segmentations within one generation. Putting labels on entire generations can place exaggerated emphasis on specific birthdates, suggesting that someone born on New Year’s Eve is somehow likely to think and act differently than someone born on New Year’s Day. To minimize that effect, Javelin applies slightly overlapping 20-year periods to define the generations as:

• Baby boomers: born in the years 1945-1965
• Gen X: born in the years 1961-1981
• Gen Y: born in the years 1979-1999