Prepaid Solutions For Transit

Transcription

1 Prepaid Solutions For Transit Who is the Prepaid Cardholder February 17, 2011 Contact: Brian Hedberg, EVP Office:

2 Who is the Prepaid Cardholder? Mike Carlos Gloria Stephanie Randy High School educa9on Temp/Seasonal employee Single Renter Trade School Mechanic Married with kids Wife works Renter College Insurance Agent Single Mother Home Owner College + Stay- at- Home- Mom Married with kids Home Owner Grad School Trader Double Income / No Kids Own + Rent PROPRIETARY. NOT FOR DISTRIBUTION. 2

3 Everyone. Mike Carlos Gloria Stephanie Randy Buys anonymous prepaid cards at the drugstore to pay his bills the day they re due. No loyalty, prepaid is a one and done tool. No bank account because no money to deposit. Born in this country, but he s9ll doesn t trust banks. Uses prepaid instead and direct deposits his paycheck. May have mul9ple cards as budge9ng tool one for saving for family vaca9ons one for paying bills, etc. Weary of unpredictable overdra] fees, she closed her checking account but kept her savings account. Direct deposits her paycheck to prepaid card to use as money management tool instead. Family maxed out credit cards trying to keep it together during 9ght 9mes and now credit card companies cut them off. Uses prepaid card instead of credit cards while they pay down debt because you can t overspend. S9ll has checking account. Doesn t believe in big brother tracking his finances so he chooses not to have bank accounts or credit cards. Uses prepaid cards because they re private. PROPRIETARY. NOT FOR DISTRIBUTION. 3

4 Wouldn t the Un- and Underbanked Prefer a Bank Account? According to the Pew Study, Key Focus Group Findings on Prepaid Debit Cards (November 2011) Consumers prefer prepaid cards because they facilitate alloca9on of funds and allow users to limit their spending to the amount on their cards, avoiding unwanted debt. Consumers were unhappy with bank overdra5 penalty fees. They preferred the up- front lower fees from prepaid cards over a possible $35 overdra] penalty fee from their checking account. Consumers like the perceived anonymity of prepaid cards. Some believed they offered beeer protec9on from iden9ty the], fraud, and privacy intrusion than do credit and bank debit cards. Consumers like the added convenience and enhanced services that prepaid cards offer. Prepaid cards allow customers to rely on third- party retailers, such as convenience stores or pharmacies, to load cash onto their cards. In addi9on, cardholders can use any ATM to access funds, and the fees are o]en lower than similar charges for checking accounts. PROPRIETARY. NOT FOR DISTRIBUTION. 4

5 But Prepaid Cards Have So Many Fees Myth Busters: Bretton-Woods. Analysis of General Purpose Reloadable Prepaid Cards (November 2013): Fourth Year Of Study ( ) Prepaid cards continue to have a cost advantage over basic checking accounts. The three-year trend shows that the average cost a consumer incurs for a checking account is increasing, while decreasing for GPR prepaid cards. Pew Charitable Trusts. Loaded with Uncertainty: Are Prepaid Cards a Smart Alternative to Checking Accounts (September 2012): Cost of GPR prepaid cards can be less than checking accounts. Many prepaid cards provide services to cardholders at a lower price than checking accounts and, for the most part, do not allow overdrafts or their accompanying fees. PROPRIETARY. NOT FOR DISTRIBUTION. 5

6 Divergence of Prepaid From Tradi9onal Bank Accounts Less Cost More Convenient Greater Security/ Replacement Entry/Con9nued Engagement with Financial Mainstream Since 2010 the cost of prepaid has been reduced while tradi9onal banking has seen a corresponding increase in similar fees making the value proposi9on even greater. Cash Bank Basic Checking w/dd Bank Basic Checking Account Prepaid Card Prepaid Card w/dd Consumer Cost Comparison Prepaid Study 1 $41.42 $ $ $ $ $ $ $ $58.00 $ $58.00 $ $ $ $0.00 $ $ $ $ $ Low High 1) Breeon- Woods: Analysis of General Purpose Reloadable Prepaid Cards, A compara9ve Cost Analysis of GPR Cards using Program Manager and Issuer Data, November

7 Convergence of Prepaid and Tradi9onal Bank Accounts PROPRIETARY. NOT FOR DISTRIBUTION. 7

8 What Do We Know About A Market? The data below reflects the median disclosed costs of banking services at six banks that had branches in Pennsylvania. Source: Pew Health Group report. Hidden Risks: The Case for Safe and Transparent Checking Accounts (April 2011). Six banks hold 40 percent of all deposits in the state, according to the Federal Deposit Insurance Corpora9on (FDIC). PROPRIETARY. NOT FOR DISTRIBUTION. 8

9 Summary Of Consumer Observa9ons Consumers embrace the value and choice afforded by prepaid Consumers embrace prepaid in because it offers improved convenience of use including reduced acquisi9on and reload costs. Consumers are using cards acquired in transit to enhance their transit experience and broadly support their everyday necessary transac9ons. Consumers value prepaid and have broadly accepted it as a key money management and payment form. Consumer expecta9ons of value are being met and o]en exceeded.

10 Suggested Strategies For Prepaid Success In Transit FOCUS: Customer Experience Focus on the Customer Experience as a means of driving addi9onal transit usage and greater adop9on of open payments through issuance of bank issued prepaid cards. Look at the overall value proposi9on of the transit fare experience and what increased value can be developed by introducing open payment solu9ons u9lizing bank issued prepaid cards. 10

11 Thank You