As the world becomes increasingly digital, prepaid cards are providing a crucial service, not only for unbanked and underbanked customers, but also for everyday shoppers seeking a convenient gift or budgeting tool.
Case in point: Shareholders who dialed in for the August monthly earnings call for Yum Brands Inc., which owns quick-service restaurant (QSR) chains Taco Bell, KFC and Pizza Hut, were the first to hear about the company’s intentions to work toward transitioning to 100% digital sales. Eventually, people could have to order solely through websites, apps or kiosks to satisfy their fast-food cravings at these brands. As a consequence, the operational change would encourage more cashless sales.
These brands join a growing chorus of businesses that view cashless transactions as potentially more efficient and secure. That said, there are those who oppose banning dollars and cents.
A few months ago, Los Angeles Councilwoman Heather Hutt introduced a motion to prohibit businesses from enacting exclusively cashless systems. Several cities have taken similar stances, asserting the practice allegedly discriminates against unbanked and underbanked individuals.
Approximately 6% of adults do not own a checking or savings account, and therefore, do not use a bank-issued debit card, per the Federal Reserve Board. Plus, the Federal Deposit Insurance Corp. reported more than 14% of households were underbanked in 2021. By the agency’s definition, these individuals “had a bank or credit union account and used nonbank financial products and services.”
Nonbank financial products include prepaid cards — both closed gift cards and reloadable open loop debits — which help fill the gap for these populations. They empower everyone to participate in commerce on multiple levels. In addition to purchasing foodservice, fuel, beverages and other convenience store mainstays, these programs support e-commerce.
“In the last few years, e-commerce adoption has increased among consumers; it has also spurred increased e-gift use — even for in-store payments — since gift cards and e-gifts are compatible with digital wallets,” said Colleen Dorwart, a spokesperson for the Retail Gift Card Association. “Gift cards and e-gifts are exceptionally versatile, and since they can be used for physical or digital payments, we expect continued interest from consumers in using them for gifting, budgeting and other payments.”
It Pays to Be Versatile
However, the unbanked and underbanked only account for $100 billion of the approximately $468 billion in transactions expected to be made on prepaid cards this year, per ResearchAndMarkets.com. This payment option appeals to all types of consumers.
“Prepaid continues to drive foot traffic into our stores, and we are seeing volume increases year over year,” said Chris Hartman, vice president of fuels, advertising and development for The Rutter’s Cos., which owns and operates 78 stores in Pennsylvania, Maryland and West Virginia.
Indeed, it’s an investment in customer service, store loyalty and add-on business. The majority of people spend an average of nearly $32 above the value when cashing in gift cards, according to Capital One Shopping Research. When people treat themselves to gift cards, they increase the balance by 8.4% than when purchasing cards for someone else.
What’s more, financial services create unique opportunities to satisfy customers’ needs through convenience.
“As we continue to grow the business, we have added digital payment offerings and have just recently added Cash App to our program. With 40 million active users, we’re excited about the potential this presents within the category,” noted Hartman.
Cash App is a mobile payment service that allows users to make online purchases as well as buy from select brick-and-mortar stores.
Additionally, some c-stores cash customers’ checks, and there’s a burgeoning interest in “reverse ATMs” that accept cash and issue prepaid cards. Several professional ballparks, amusement parks and a spattering of restaurants have already incorporated these devices, according to news website Axios.com.
Regardless of the type and extent of financial services offered, Dorwat stressed the importance of marketing them via multiple platforms.
“C-stores can tap into new revenue streams by meeting people where they are shopping with the versatile payment tools they want,” she explained. “These programs can be advertised and promoted via a c-store’s website or mobile app. We’d recommend ensuring information about programs is front and center. It should also be easy for shoppers to find where they can buy gift cards and e-gifts when online.”
