Reload Capability Eludes Consumers Despite Prepaid’s Popularity

The concept of the reloadable general-purpose prepaid card is a familiar one to those who work in the prepaid card industry, but it hasn't caught on with the general public, according to findings from Mercator Advisory Group Inc. A Mercator survey of 1,012 adults last May and June found that 36% of adults were unaware that prepaid cards with the Visa, MasterCard, American Express, and Discover brands could be reloaded. Another 53% were aware of the card's reload capabilities, but had never used them. Only 11% of consumers knew the cards could be reloaded and had actually done so. The findings are part of a broad study by Maynard, Mass.-based Mercator that predicts general-purpose prepaid card loads will surpass loads on closed-loop, or merchant-specific, prepaid cards in 2012 (Digital Transactions News, Dec. 1, 2009). Extrapolating its findings to the U.S. adult population, Mercator estimates 79.7 million consumers don't know about open-loop, or network branded, prepaid cards' reload capabilities. That's a big information deficit at a time when banks, merchants, and prepaid card processors want to move prepaid cards beyond their gift card origins and into fast-growing niches, household budgeting being a major opportunity. Mercator estimates the aware and using group at 24.4 million consumers. “Clearly we have some real awareness generation to do,” Tim Sloane, director of Mercator's Prepaid Advisory Service, told attendees at this week's Prepaid Expo USA conference in Las Vegas. Stores capture an estimated 62% of reloads, making them by far the most common location of reloads on general-purpose prepaid cards. The next most common reload locations were the consumer's online bank site and “other,” both at 14%. Other online sites using a credit or debit card capture 10% of the general-purpose prepaid reloads. Gift giving remains by far the biggest use consumers report about their gift/prepaid card purchases. Some 87% of purchasers say they bought a gift or prepaid card within the past year for the purpose of giving a gift to a family member, friend, or for some social purpose. (Consumers could report multiple uses.) But financial management is beginning to catch on despite the consumer ignorance of reload capabilities. Some 14% of respondents said they used a prepaid card for household-expense management in the past year. That's an updated version of old-fashioned household cash management, according to Sloane. “In a way they're replacing mom's shoeboxes,” he says. Even among those who had used gift and other prepaid cards for household budgeting in the past year, however, many people discard the cards rather than reload them. Eleven percent of card purchasers cited prepaid cards as convenient ways to pay without a conventional debit card, and the same percentage cited prepaid cards as a convenient way to send money to a friend or relative. Ten percent said they used prepaid cards as “safe, private way to buy online,” and 10% also said they used prepaid cards as gifts for business associates or clients. Seven percent said they use gift/prepaid cards to help family members or friends with budgeting. In another finding, Mercator says 68% of gift card purchasers bought a card from the retailer's own store and 45% bought one from a gift card display at another retailer. (Again, respondents could give more than one answer.) Fourteen percent bought a card from a retailer's own Web site, 7% from a bank, either in a branch or online, and 5% from a Web site that sells a variety of prepaid cards.