In our current economy, prepaid programs are constantly showing strength as they continue to grow. Mercator Advisory Group research along with connected studies displayed the growth in various prepaid branches. Their research projects growth in a range from 3% CAGR to as high as 10% within the next 3 to 5 years. However, the industry must adapt to new technologies to enable and support new growth.

Digital Technology Strengthens Prepaid Cards

This shift in new technology does not create innovative advancements for prepaid programs but instead allows prepaid systems to reach equality with debit and credit cards creating a remarkable resource in consumers’ wallets. President and Chief Operating Officer at the credit union service organization Envisant, shows the challenges and the successes of such efforts in the Credit Union Magazine:

“Digital technology has done much to enhance the speed and security of prepaid cards. Virtual cards are making issuance even faster and more cost-effective. Tokenization adds another level of security and ease of use. Randomly generated tokens are stored by stores and e-commerce sites while cardholders’ private details remain in one secure database. This technology also allows shoppers to easily switch between online and in-person shopping through mobile wallets.”

Research from Mercator provides evidence that prepaid cards represent 10% of U.S. household payment methods, however, 23% of consumers use retailer-specific wallets, and 35% use universal wallets to make payments. Because these trends are projected to grow, prepaid programs need to have a standing in both the underlying aspects such as tokenization and consumer-concerned wallet technology.

Using Technology to Please Cardholders

Unlike Credit Unions, retailers have clear paths to utilize their wallets and closed-loop value accounts. Calderone emphasizes that Credit Unions, and other financial institutions, need to work to connect their open-loop products to universal wallets as a way to stay relevant:

“Prepaid cards and technology can be a powerful way for credit unions to connect with current members and reach out to new markets. The most effective use of prepaid cards will harness the advantages that technology offers to delight cardholders and compete in an increasingly digital world.”

Prepaid Programs as a Guide to Other Banking Services

Calderone comments specifically on how critical wallet space is for customer acquisition. Research shows that 55% of Gen Z individuals and more than 70% of millennials use mobile devices to research and buy products online. Together with these generations’ strong inclination to freelance full-time, or freelance as a moonlighting opportunity, there is a significant path to use prepaid cards connected to these technologies as a primary method of payment, driving usage, and simplifying payment processes.

Financial institutions that understand this as a tool for acquisition can help to bring technologically inclined consumers into their midst. They can do this by creating meaningful customer interactions that begin with prepaid and then extend into other banking services. The main component of this activity is the technology, namely front-end apps, and wallets that allow for a strong long-term relationship.