Safety and security are contributing to the popularity of prepaid gift cards.
The new Prepaid and Gift Cards in the U.S., 5th Edition from Packaged Facts has revealed that prepaid cards are growing in popularity, especially among low income customers, Millennials and individuals who are unbanked or underbanked.
Giving credit where credit is due, PayPal with its prepaid card is one of the chief industry players responsible for bridging the gap between prepaid cards as a niche commodity and the medium’s growing appeal.
“Increasingly competitive on everything from fees to safety and security to transparency, prepaid card accounts have become real alternatives to traditional bank accounts,” commented David Sprinkle, research director, Packaged Facts.
Packaged Facts found that almost half (48%) of prepaid card users have a PayPal prepaid card, well above major players such as Green Dot, NetSpend, American Express and the Walmart MoneyCard. Moreover, some 28% of them say they use the PayPal “the most,” a far higher rate of response than for other cards.
The results suggest that PayPal has become a significant player among consumers seeking alternatives to traditional banking: PayPal prepaid card holders can link their card to a PayPal account—and must do so in order to access any of its online features. This sets PayPal ahead of its competition because no other prepaid card can be directly linked in the same way. This alone may have pushed PayPal prepaid cards into the top tier of usage performers, given the enormous penetration of PayPal accounts and their outside-the-banking-system utility.
Indeed, linking a PayPal prepaid card to a PayPal account gives cardholders access to an online bill payment service, the option to open a tiered-rate savings account, PayPal person-to-person transfers, and the ability to instantly fund the card from account funds. With all of these features under one roof, consumers can do everything they can do with a traditional checking and savings account, except write checks.
PayPal prepaid card users can also earn cash back rewards, still a relative novelty in this payment instrument space. In fact, this is so rare in the prepaid card space that the PayPal Prepaid MasterCard and the Pay Walgreens Balance Financial Prepaid MasterCard stand out for offering rewards and are ahead of the curve. Packaged Facts believes the trend will catch on to the point that, like credit cards, prepaid card users will soon expect to earn rewards. However, Packaged Facts cautions that there is a caveat to bringing rewards into the prepaid card market on a larger scale. Using the credit card industry as comparison, the costs of offering the rewards may begin to compress margins while promoting a slippery slope of consumer expectation.