Prepaid in the Wild: New Primary Research Findings

Navigator Edition: March 2015
By: Melissa Fox and Jake MacMichael

A recent primary research study shows that, contrary to conventional wisdom, general purpose reloadable (GPR) prepaid cards are not predominantly used by the unbanked.  The study, conducted by First Annapolis in partnership with BAI, indicates that most GPR cardholders use their prepaid cards in addition to, not in lieu of, traditional banking products.

Of 1,000 GPR cardholders surveyed, 87% report having a checking account.  Traditional debit cards account for, on average, 22% of their monthly payment transactions, while GPR cards account for 13%.

Figure 1: Financial Product Ownership

Fig-1_-Financial-Product-OwnershipSource: First Annapolis Consulting and BAI market research.

Figure 2: Payment Transaction Mix

Fig--2_-Payment-Transaction-MixSource: First Annapolis Consulting and BAI market research.

Although some consumers use GPR cards as a true checking account alternative, the majority of GPR cardholders use the product as a secondary or tertiary payment option that complements their primary banking relationship.

Why do consumers choose prepaid?  Survey results and feedback from focus group participants suggest that cardholders view their  GPR card as offering three specific advantages over existing payment methods:   1) they cannot overdraw or overspend when using the product; 2) it helps them manage, track, or segment their spend, and 3) it acts as a security buffer, protecting their money and financial data.

“It’s easier to use instead of having to always keep a balance on my bank account and worry about overdraft fees.”    

“I keep money on that card for ‘fun’ items that I would normally not buy. I like to keep that money separate from my normal bank account & credit card.”    

“When I buy items online and if the store’s account gets hacked, they can only get a certain amount of money. Also, if the card gets stolen it is also limited.”

Although GPR cards are still an emerging payment product, banks have been late to market in this space.  So while users have may have a banking relationship, they are supplementing that relationship with cards offered by nonbank prepaid providers.  Green Dot, NetSpend, and American Express accounted for 60% of surveyed users’ primary cards.  Only 1 in 5 survey participants indicated their primary GPR card is a bank product, and only two bank issuers were among the top 10 brands cited.

Despite this imbalance, survey results indicate that banks are likely better positioned than specialized issuers to meet the needs of GPR cardholders going forward.  GPR users saw benefits from having their prepaid relationship and banking relationship with the same bank, suggesting an opportunity for bank issuers to reclaim that lost share of wallet.  Among respondents not currently using GPR cards, 11% indicated they were likely to extremely likely to sign up for a GPR card within the next 12 months. Of those, 41% indicated they would prefer to get the product from their bank or credit union, compared to 16% who would prefer a non-bank.

While increased product visibility and fee transparency are required, the research suggests that the ability leverage bank assets to offer GPR cards as an integrated complement to a DDA will give banks a distinct advantage as GPR cards become even more mass market.

Prepaid in the Wild is a syndicated research study published by BAI and First Annapolis Consulting, designed to provide insights into consumer perceptions and use of GPR prepaid card products, understand and compare current bank and non-bank program offerings, and explore the customer experience and how it varies among issuers to identify best practices.

Conducted in Q2 and Q3 of 2014, study findings are based on a combination of consumer focus groups and an online consumer survey of 1,000 GPR prepaid card users and 2,019 non-users, as well as 23 mystery shops of both bank and non-bank issuers.

For more information, please contact Melissa Fox, Manager,; or Jake MacMichael, Analyst, Both are members of the Deposit Access Practice, specializing in Debit and Prepaid.

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