Millennials’ use of prepaid cards driving innovation

Analyst View Point Series

Table of Contents

Market Context

Key Insights

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Market Context

As prepaid cards are gaining popularity and witnessing high growth across the world,

card issuers have started thinking about how prepaid services can be designed to fit

unique needs of diverse sets of consumers. Among the various consumer sets,

marketers across industries are finding that understanding the requirements of the

millennials is the most difficult as they showcase the most unpredictable behavior.

However, understanding millennials purchase behavior is also very important as this consumer group will drive the market in the decades ahead.

Key Insights

Millennials approach towards management of finances, saving, and spending is

unique from other consumer groups. This group is cautious about getting into debt

and overdrafting their accounts. Their methods of budgeting and spend control are

different from the previous generations. This group is more likely to turn to new

technologies and products such as prepaid cards to manage their spending.

Millennials consider the main benefits of prepaid cards are the ability to track spending

and budgeting. This consumer group also uses prepaid cards for shopping and paying

bills online more than any other age group. This helps millennials in compartmentalizing their funds into categorizes such as fun and essentials.

Key Insights

Card issuers are focusing on designing prepaid cards that cater to millennials’

requirements. For instance, AmEx added new tools in its Serve prepaid card allowing

consumers to set budgets, categorize spending, and save for an unexpected or

upcoming expense. To attract millennials, Serve was relaunched as a full-fledged

digital bank account, with features such as ability to make peer-to-peer payments,

direct deposit and money withdrawal from ATMs. Serve also does not require a credit check or minimum balance maintenance.

Key Insights

Considering the high amount of time millennials spend on their mobile phones and

online, card issuers are working towards introducing innovative mobile-optimized

prepaid offerings. In 2012, Visa launched a virtual prepaid account called Visa Mobile

Prepaid which allowed consumers to transfer funds, check their accounts, and deposit

cheques remotely, along with a host of other services.

Many parents use prepaid cards as a way to teach their children financial

responsibility. This allows card issuers to connect with teens early on in their lives. As

millennials grow older, card companies hope that this demographic will move towards

owning their own prepaid, debit or credit cards and remain loyal to their brand.

PayNXT360 View

Millennials have different financial needs than other consumer segments such as

baby boomers or Generation X. The younger consumers have emerging financial

needs that require a different set of tools such as prepaid cards. PayNXT360

believes card issuers will increase their focus on this demographic and introduce

technology driven, unique products that will attract this consumer group. Companies

will increase their investment in product development and marketing campaigns as

millennials hold significance not only as a demographic that drives prepaid usage, but also as future users of traditional banking products.

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