Tech Time: Enhancing prepaid cards with remote deposits

New secure technology offers a low-cost on-ramp for millennials and underbanked members.

For several years, prepaid and stored value cards have been among the hottest growth stories in the payments landscape. According to the Federal Reserve’s 2016 Payments Study, nearly 10 billion purchases were made using these cards in 2015, an increase of more than 67 percent since 2009. Even as the growth of “closed loop” cards limited to a defined group of retailers has moderated, interest in general purpose cards that can be used anywhere non-prepaid debit cards are accepted is still growing.

Several factors underpin the popularity of prepaid cards. Millennials find them to be a useful budgeting tool, and several other demographic segments also value them for online commerce. Moreover, in the wake of the Great Recession, these cards have become a handy alternative for consumers wary of accumulating card balances or unable to qualify for a credit card. As such, they can serve as an entry-level product for the next generation of credit union members.

Many times, however, users won’t reload prepaid cards—discarding them once their initial value is depleted—and this has long been a barrier to their usefulness. This poses business model challenges, not only because of the increasing expense of manufacturing prepaid cards but also because of the lost opportunity to nurture long-term relationships with stored-value card holders.

Recent fintech innovations have enabled prepaid cards to be managed via mobile apps, paving the way for a deeper relationship between cardholder and issuer and extending the longevity of the cards. For example, until recently, crediting mobile check deposits to prepaid card balances was deemed too risky, and immediate funds availability was out of the question. However, new technologies now allow for real-time decisioning about holds on these deposited items based on characteristics of the segment of cardholders to which a member corresponds. Because of this real-time decisioning, RDC can be made available securely in prepaid card apps.


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