Member Exclusive, Payments

Reloadable prepaid cards act as a fertile platform for innovation

  • The reloadable prepaid card market was robust before new retailers joined in.
  • An increasing number of brands are issuing them to engage with their customers.
close

Email a Friend

Reloadable prepaid cards act as a fertile platform for innovation

About a decade ago, tax preparation company H&R Block began offering its clients their IRS refunds on debit cards, which they could then spend anywhere that accepted Mastercard. Now, the reloadable H&R-branded Emerald Card is actually serving as a defacto year-around checking account for many, with more than 2 million clients depositing about $9 billion onto the cards in 2018, using them on a regular basis for groceries, clothing, utility bills, ATM withdrawals and other expenses.

“H&R Block aims to give our clients greater financial flexibility throughout the year,” said Margaret Ostrowski, the company’s vice president for financial products and partnerships. H&R Block is just one of a growing number of service-providers and retailers that are now involved in providing banking services to customers and clients through reloadable prepaid cards. In most cases, these companies are partnering with banks to offer the cards, rather than obtaining their own national banking licenses, which can be an arduous process. But, to many consumers, it can seem like every store now also wants to be your bank.

The reloadable prepaid card market was robust even before many retailers joined it, as higher bank fees and minimum checking account balances in the wake of the Great Recession left more than 7 percent of the American population without a bank-issued debit or credit card, according to IBISWorld. At the same time, the growth in online shopping and other digital transactions also fueled demand for cards. In 2018, reloadable cards brought in revenue of $10.9 billion in the United States, and the sector is growing about 2.6 percent a year, according to IBISWorld.

“Reloadable cards are basically meeting an unmet consumer need,” said Tiffani Montez, a retail banking senior analyst at Aite Group, who has also studied the trend. But the features of many of these prepaid cards have also caught up to, and sometimes surpassed, those offered by checking accounts, with generous rewards programs, options for direct deposits of paychecks, automated savings schemes and online spending trackers.

“Prepaid continues to be a platform of choice for innovation, allowing partners in multiple sectors to thrive,” said Laura MacKenzie, Senior Vice President in Prepaid at Mastercard.

These features are part of what has brought brands like Walmart, Starbucks and the grocery chain Kroger, which often play up the rewards and budgeting angles, to offer such cards. Budgeting is the number one reason people use such cards, according to a study by InComm, which manages American Express’s prepaid products, including its Bluebird account, offered through Walmart.

But for retailers, the cards are also a valuable marketing tool, Montez said, adding that they don’t make money directly from the cards. “This is really about building loyalty, a way to keep people coming back to the store,” she said.

Some retailers said that branded cards offer more opportunity to engage with customers.

“We want our clients to love their experience with H&R Block,” Ostrowski said, and the card is another way to encourage that.

0 comments on “Reloadable prepaid cards act as a fertile platform for innovation”

Payments

With Direct Payouts, Visa can push payments to cards and accounts cross border

  • Visa Direct has built an ecosystem of senders and receivers powered by push payments.
  • Visa is now launching Visa Direct Payouts, extending push payments cross border and to more types of accounts.
Zachary Miller | March 30, 2021
Payments

‘Payment companies are taking a clear political stance’: Politics and payments in the wake of the Trump administration

  • Should payments be politicized? As more than 400 people face criminal charges for the Capitol riots, we explore the repercussions on the payments industry.
  • Experts weigh in on potential polarization and regulations in the long term.
Rimal Farrukh | March 24, 2021
Payments

‘2020 was the year of QR code adoption — 2021 will be the explosion’: QR codes continue to climb in popularity

  • Past the three-month mark of 2021, we’re still seeing QR codes grow in popularity.
  • But how this payment method will expand continues to leave the future of QR codes kind of blurry.
Rivka Abramson | March 18, 2021
Payments

Baseball fans will get a cashless payment experience when they re-enter Petco Park this season

  • Baseball fans will have a cashless experience when they re-enter San Diego Padres' Petco Park next season.
  • The team signed a partnership with Tappit to enable fans to make transactions through the MLB Ballpark app at the stadium.
Rimal Farrukh | March 18, 2021
Payments

Subway standardizes payments across its stores and geographic footprint

  • Subway now offers a standardized payment solution across its European franchisees.
  • Amadis and Worldline are part of nexo standards, a member association which aims to globally standardize payment processes.
Rivka Abramson | March 12, 2021
More Articles