As part of its syndicated market research report Cardbeat, Auriemma Consulting Group studied the development of prepaid cards targeted to children and young adults. It concluded that the market for youth cards, also called teen cards, seems poised for substantial growth.
Youth cards, like travel or payroll cards, are part of a large class of general-purpose, reloadable (GPR) cards. The main difference between GPR cards is how and to whom they are marketed. According to Nancy Stahl, Editor of Cardbeat, growth in the youth card market will be gradual but steady, with the speed of adoption driven by how effectively the cards are marketed.
Card issuers and program managers have to "reposition the product in the consumer's mind right now," she said. "There are people who are interested in it. It's just got to get out there more - awareness, familiarity with it, and marketing."
An online survey of 528 credit cardholders conducted by Cardbeat in April 2010 showed that 64 percent of parents with children between the ages of 10 and 20 were unaware of the youth card. Of the 36 percent who had heard of youth cards, Cardbeat found that the main way parents became informed of them was from other parents. "Word of mouth was definitely the top one," Stahl said.
On the other hand, only 4 percent of respondents heard about the cards from their children. The conclusion is that, while the cards are marketed and targeted to "youth," they should be marketed to parents as well.
"It's parents talking to parents or adults talking to kids," Stahl said. "They buy into it because they're the ones who are going to fund it pretty much and introduce their children to it." Stahl added that youth cards should be positioned as prepaid debit cards. "The younger folks, the younger generations, they are the ones who really gravitate more toward the debit card than the credit card," she said.
"It's almost like a managing finance tool. So that's what issuers would be best to emphasize. It's security as well. It's a fixed amount of money until you add money to it."
In its survey Cardbeat asked cardholders the reasons why they would purchase youth cards for their children. The top three answers were:
As for the impact of current legislation on the youth card market, or on the GPR market in general, Scott Strumello, Associate at ACG, doesn't see much of an effect. The Durbin Amendment to The Restoring American Financial Stability Act of 2010 would not affect GPR cards because "they're mainly driven by fee income," not interchange, according to Strumello.
Additionally, provisions of the Credit Card Accountability, Responsibility and Disclosure Act of 2009 mainly target fees and expiration dates on closed-loop gift cards, Strumello said.
Stahl predicts slow but steady growth for GPR cards as consumer awareness of the cards gradually increases in the coming years.
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