The unbanked and underbanked consumer segments are under increasing scrutiny to understand what they want and need in prepaid card products. In a December 2009 impact note entitled Prepaid Debit Cards: Barriers to Adoption, payments industry advisory Aite Group LLC analyzed why some consumers choose prepaid cards while others do not.
In November and December 2008, Aite surveyed 400 frequenters of eight check cashing stores in urban and rural communities in Virginia. For the purposes of its research, Aite delineated checking account holders (underbanked) from those that lacked checking accounts (unbanked). Aite then segmented respondents into five categories: adopters, rejectors, unreached prospects, purchase intenders and lapsed owners.
This segment represented 30 percent of respondents. Aite found that adopters have embraced prepaid cards; not only do they try them but they reload them as well. According to Judy Fishman, Aite Analyst and co-author of the report, adopters consider themselves technologically savvy and willing to try new things. Consequently, they have incorporated prepaid cards into their lives.
Unlike adopters, rejectors have no interest in prepaid cards; because they make up 43 percent of Aite's research, prepaid providers might take heed regarding why.
"They feel the cards are either a problem or a mystery," Fishman said. "And they know about them. They know they're there. But at this moment in time, they don't have any interest in trying them." Fishman attributed rejectors' reticence to a lack of technological sophistication, as opposed to lack of education. "I think the adopters are more willing to use products that are a little higher up in the hierarchy of complexity," she said.
Fishman advises providers to reach rejectors by conveying to them clearly and concisely the benefits of prepaid cards, such as that they are safer to carry than cash. "And in what ways does it give them an opportunity to participate in channels that are currently not available to them if they rely fully on cash or money orders," she said. Unreached Prospects Seventeen percent of research participants were put in the unreached prospects category. These consumers are unaware of prepaid cards and tend to be both younger (25 and under) and older (over 45) than adopters. They are more involved with technology than rejectors but prefer to pay with cash.
According to Fishman, for the younger unreached prospects, the idea of a prepaid debit card has not sunk in; for the older consumers, debit cards are a newer product and have yet to recognize prepaid cards as a natural extension to them.
The report recommends mass marketing and in-store demonstrations as ways to familiarize unreached prospects with prepaid cards.
The other two categories, purchase intenders (5 percent) and lapsed owners (4 percent) were not analyzed in the report because these groups are small and "appear to be already sensitive to the product [and] would be apt to be caught in a broad category," Fishman said.
She recommends that prepaid card providers continue to reinforce brand and product adoption, as well as the reloading of the cards by adopters.
Additionally, providers should focus on convincing unreached prospects to try prepaid cards by providing them simple and relevant information.
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