Where the Banks Aren't: Nontraditional/Nonbank Advances in Branded Prepaid Cards
AbstractSan Francisco, CA, USA December 14, 2007
Payment network-branded prepaid cards represent the "next big thing" in consumer payment cards. However, banks have yet to pursue the growth potential of general purpose reloadable cards for the unbanked population, which represents an untapped US$192 billion market.
Branded (Visa, MasterCard) payment cards have largely been the domain of traditional retail banks. Following on the successes of branded credit and debit cards, branded prepaid cards are starting to have a considerable market presence. However, from an issuance perspective, these prepaid cards are significantly different from their credit and debit cousins: they are being offered and marketed by nontraditional and nonbanks such as NetSpend, Wal-Mart, and Western Union.
In a new report, , Celent focuses on general purpose reloadable (GPR) cards and the players that dominate.
Nonbank players have recognized the attractiveness of these cards to the US unbanked, underbanked, and immigrant populations historically of little interest to traditional retail banks. Recognizing the potential of a 36 million person, $192 billion market, nontraditional players have taken a strategic approach in supplanting bank accounts with prepaid card accounts while offering the same ancillary services as retail banks (e.g., direct deposit, ATM access, overdraft protection, remittance services, and mobile features).
In a highly competitive retail banking environment, banks should be looking for ways to reach out to the unbanked. According to Red Gillen, senior analyst at Celent, "Branded prepaid card programs constitute 'gateway' financial products that could support the conversion of the unbanked population to become bank customers. Banks have a lot to learn from the nontraditional/nonbanks."
This report spotlights some of the main players in the branded prepaid card space and suggests models that banks could pursue to participate in this market. The report contains 58 pages, 22 figures and 15 tables. A table of contents is available online.
Members of Celent's Retail Banking research service can download the report electronically by clicking on the icon to the left. Non-members should contact firstname.lastname@example.org for more information.
Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].
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Table of ContentsSan Francisco, CA, USA December 14, 2007
|Why This Matters: The Size and Plight of the Unbanked Market||05|
|GPR Card Background and Taxonomy||11|
|Just How Much Money Are We Talking About? GPR Revenue Streams and Sizing||18|
|How GPR Cards Are Different||21|
|The Usurpers: Nontraditional and Nonbanks in Control of the Unbanked Card Space||26|
|Nontraditional/Nonbank Spotlight Table||35|
|What's a Bank to Do?||52|
|Trends to Watch||57|