Key to mobile adoption could be mature prepaid market
April 9, 2015
MADISON, Wis. (4/10/15)--Credit union executives trying to read the tea leaves on mobile payment adoptions are advised to look at the prepaid market, according to one payments executive.
Several years ago, prepaid cards were in the same spot, seeking consumer adoption and merchants that would accept them, according to David Prochnow, vice president of prepaid products for MB Financial Bank N.A. (PaymentsSource April 9). In time, the proliferation of gift cards and other prepaid products has benefited from lower fees and more merchant acceptance.
Prochnow said a similar evolution is likely for mobile payments, which is often described as being in the "first inning" of its evolution. Prochnow said prepaid adoption at one time was similar to where Apple Pay is now. He predicted a similar adoption path for mobile.
If mobile gains traction, consumers who use prepaid cards on a regular basis could play a role similar to the one they have played with prepaid cards, PaymentsSource said. Many unbanked consumers rely on their smartphones to access financial services or the Internet, so mobile wallets would be a good fit for them.
Adding mobile apps to a prepaid card product can prolong the cards' usage, Madeline K. Aufseeser, senior analyst with Aite Group Consulting, told PaymentsSource. Connecting mobile with prepaid cards makes both products "stickier," Aufseeser added. Rewards products or loyalty points also can be attached to prepaid cards, she said.
One advantage for mobile wallet developers who work with prepaid card providers is that the prepaid market has finally matured. About 196 million active debit, payroll debit or prepaid debit cards are in the hands of U.S. consumers, said Aufseeser. When considering 246 million U.S. adults are at age 18 or older, one could argue that prepaid vehicles have 80% of the market.