http://www.zdnet.com/blog/btl/e-commerce-driving-up-prepaid-card-use-report-says/73346

E-commerce driving up prepaid card use, report says

Consumers are turning more to prepaid cards to pay bills and make online purchases, according to a new report. Prepaid cards are on the rise especially among members of Generation Y and consumers without easy access to banks, according to a new report from Javelin Strategy & Research.
Some of the reasons being attributed to the recent growth of prepaid card use is that this method offers financial independence and help to establish credit.
E-commerce, in particular, is driving up prepaid card usage as consumers have started to use them more to pay bills and make online purchases.
Additionally, Javelin researchers compare prepaid cards to cash, citing that the latter is generally “unreachable” when shopping online. For “underbanked” customers, or those who don’t have access to payment (credit or debit) cards or checking accounts, prepaid cards fill a void.
Otherwise, these consumers have to rely on other options, such as eBillme, that aren’t necessarily provided by all small and major retailers.
There’s also another incentive to prepaid cards that rings similar to emerging mobile commerce solutions: it’s an easy way to track loyalty points and memberships, among other purchasing statistics among consumers.
Javelin researchers cited the PayPal Prepaid MasterCard, which can be used anywhere MasterCard is accepted, making it a very versatile option. Furthermore, this card offers paypack rewards when linked to a PayPal account.
Right now, prepaid cards currently only account for 8 percent of the total online payments volume. Yet prepaid cards’ dollar volume is predicted to increase from $21 billion in 2011 to $32 billion in 2016 as analysts expect that the underbanked population is actually going to grow.

http://www.huffingtonpost.com/2012/04/11/prepaid-cards-javelin_n_1416181.html

 

 

Prepaid Cards Rise In Popularity As More Americans Are Shut Out From Traditional Banks 

Increasingly shut out of traditional bank accounts, more Americans are turning to prepaid debit cards often notorious for their high fees.
Prepaid cards run the gamut: some are re-loadable plastic cards that can be used for the direct deposit of paychecks and function almost like real checking accounts, while others are single-use cards more akin to gift certificates.

Use of prepaid cards among all Americans climbed to 13 percent in 2011 from 11 percent in 2010, according to a new report from Javelin Strategy & Research, a market research group. The number of people with traditional checking accounts, savings accounts, credit or debit cards declined by 11 percentage points since 2010, the report said.

"The economy and changes in regulations have really put pressure on checking accounts," said the paper's author Beth Robertson, the director of payments research at Javelin. "It has been changing the nature of those products to a certain extent and restricting ownership."
The youngest consumers have felt the brunt of this. New rules under the CARD Act, which took effect in 2010, set an age limit on credit cards, unless the card holder is self-supporting or has a cosigner. Free checking accounts -- a typical option for a first-time account holders -- have also become more rare in the last few years.
The new restrictions have pushed teenagers and twenty-somethings to seek alternative solutions, that still allow them to shop online, electronically pay bills, monitor an online account, link a "savings" account and even get rewards points, said Robertson. One in six Gen-Y Americans -- those who are roughly 30 and under -- currently have a prepaid card, according to the report.

For parents who give money to their kids but want to monitor their spending, prepaid cards have also become an increasingly popular alternative to cash or credit cards. "Parents can fund and monitor spending, and set limits on certain kinds of spending, like blocking certain merchants," Robertson said.

Other prepaid card users include Americans who have been off-ramped from retail banks -- 18 percent of people who have no bank account say they have a prepaid card instead, according to the Javelin report. Today, 12 percent of people in the United States have no checking account, compared to only 8 percent in 2010, for some of the same reasons young people don't have them: It's getting harder to qualify for one and there are fewer free checking accounts to be found.
The growing prepaid industry is largely unregulated -- and for now, Robertson said, it is largely self-policed. Several years ago, when prepaid cards were first becoming popular, some cards had high and hidden fees. But that has changed somewhat in the last year, as card makers have added more transparency to pricing, said Robertson. Traditional banks and card-makers, like USAA and American Express, are increasingly offering prepaid cards as well.