- The US prepaid card ecosystem is huge, but it's becoming a complicated space to navigate. There were 10.7 billion prepaid card transactions worth $290 billion in 2016, according to The Federal Reserve, and Business Insider Intelligence expects that to grow to $396 billion by 2022. However, shifts in demographics, disbursements for employees in the gig economy, impending regulations, and the rise of the Banking-as-a-Service (BaaS) model are spurring changes that issuers need to grapple with.
- New entrants are moving to compete for market share in response to the shifting environment. The prepaid space has historically been filled with incumbents like Green Dot. Now, though, new players are trying to gain share, causing incumbents to consolidate through acquisitions and partnerships as a means of staying ahead. These new players largely fall into two categories: fintechs and big tech companies.
- As the prepaid ecosystem becomes more competitive, the way customers use their prepaid cards is also changing. By understanding changes in demographics, consumer behavior, and factors impacting current monetization models, issuers can crack this increasingly competitive market and obtain a valuable edge. This means putting more focus on younger consumers, reaching them through both physical and digital channels, and reconsidering approaches to monetization.
- Firms need to rethink their strategies to best attract consumers. By targeting younger users, from both unbanked populations and high-income segments, firms can grab a greater share of the market. But they also need to provide convenient, multichannel access, and do so in a way that facilitates profitability.
The US prepaid card ecosystem is becoming a complicated space for issuers to navigate. New demographics, including millennials, are turning to prepaid, widening the sector's addressable audience beyond the underbanked and resulting in a need to cater to very different customer segments. Meanwhile, disbursements for employees in the gig economy, CFPB regulatory changes coming into effect, and the rise of the Banking-as-a-Service (BaaS) model are spurring shifts likely to keep the space evolving in the near term.
That's making the prepaid space attractive for new entrants. Once dominated by legacy providers, the industry is now seeing tech companies like Apple, Square, and Venmo entering the space in an attempt to capitalize on increased usage by offering competitive pricing and appealing offerings. They’re likely entering the market as a means of customer acquisition, to [...]