Growth in "No Overdraft Fee" Prepaid Cards Steal Bank Transactions and Revenues

Bank Systems and Technology today reports Card Hub just released their Prepaid Cards Report – 2014.  In it they document further what many are documenting:  re-loadable prepaid card volume has tripled in recent years.  Prepaid card payments will be as much as one quarter of all debit card transactions as soon as 2015.  This means community and regional banks are seeing their debit card transactions by their consumers being shifted to prepaid cards.  It is not the un-banked that is driving this growth, but bank customers who are under-served by financial institutions.

How are they under-served?  Because bank debit cards do not provide the services they can get with prepaid cards.  Specifically the Card Hub report states:

       (Prepaid Cards) are a great tool for a lot of people as

       they are safer than cash and offer no overdraft fees.

How can we be any clearer:  community and regional financial institutions are losing transactions and revenues to prepaid cards because they do not clearly promote and offer the feature of “no overdraft fees ever.”   When they lose transactions they lose interchange, but also other fee revenues associated with transactions.   Banks can offer an account with no overdraft fees ever and win back these growing transaction and revenues they are losing. Card Hub points out that consumers pay monthly fees in almost all cases to have the services of prepaid cards.  And offering such products does not cannibalize existing revenues because the user segments are different.  Just ask our PaySound^® customers.