Prepaid Debit: The New Checking Account?
One of the more noteworthy developments in 2012 was the evolution of prepaid debit cards. Previously best known for their affiliation with b-list celebrities, prepaid debit cards attempted to become a little more mainstream with the introduction of cards from Chase, American Express, and Walmart. While these institutions attempt to shed the shadow cast by cards that charged consumers $99.95 a year just for the privilege of carrying a Kardashian in their back pocket, the two key strategic questions we’re typically hearing from community based financial institutions are:
- Do we need to follow in Chase’s footsteps and offer a prepaid card of our own?
- How big of a threat are these new prepaid cards to our traditional checking accounts?
Do you need to offer a prepaid debit card?
Yes, no, and maybe. How’s that for decisive? As with any product decision, it really boils down to your target demographics coupled with how it fits on the shelf along with your existing product offerings. There is a distinction between offering niche reloadable cards, or those that have a specific purpose such as an international travel card or gift card, versus cards that are positioned as a replacement or supplement to a traditional checking account. In the case of the latter, it’s a little more difficult to see where a prepaid card fits in the product menu for institutions still offering free checking. The fit is much easier to see in cases like the Chase Liquid prepaid card, where the card’s $4.95 monthly fee might be a very attractive alternative to the $12 monthly fee for customers unable to meet the direct deposit or minimum balance requirements on Chase’s base checking account. For Chase, they essentially found a less antagonistic $5 fee to help offset lost Durbin interchange income, something that Bank of America was desperately seeking before sparking consumer and political outrage in October of 2011 with their infamous (and short-lived) $5 debit card fee.
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