Recent Visa Investor Relations presentations have confirmed the importance of debit with the current environment supporting debit growth – including prepaid products – over credit. Here, the Vice Chairman of Visa Inc. validates debit dominance:
“Debit actually grew 12% in the month of May and was even better than that in the last few weeks of May which was, by any stretch, very healthy debit growth even in normal times. And of course, it’s significantly outperformed credit, which improved by 9 points from April but was still declining 21%.
And I think that the interesting thing about debit is we’re seeing strength just across the board in the US on debit. When you look at it, you see strength across different spend segments. You even see strength across ticket size bands. Debit is gaining share even in larger ticket – higher ticket transactions. We see that. Just about any cut you make, debit is outperforming credit.
Now, that’s not completely a surprise because we do see things like these – these kinds of shifts in times of stress. Debit tends to be used more for essential purchases. The stimulus payments went into people’s bank accounts. And so, it would be natural to use debit cards and debit credentials for that.”– Vasant Prabhu, Vice Chairman & CFO, Visa Inc., Morgan Stanley Virtual US Financial Conference. June 9, 2020 (Corrected Transcript)
Additionally, a June 2019 survey conducted by Mercator Advisory Group reports prepaid cards experienced a 17% overall growth in the U.S. with likely continued growth as prepaid users buy more types of prepaid cards — store cards, general purpose cards and general purpose reloadable cards.
According to Mercator, prepaid products are favored by younger consumers – about 7 in 10 of those surveyed under 45 are buying prepaid cards compared to those 45+ consumers with 5 in 10 buying prepaid cards. At the time of the survey, redeeming online was almost equal to redemption in physical stores (66% versus 73%) with the 18-34 years of age cohort more likely to redeem online.
This past October, the Mercator report’s author made prescient observations about the category when he stated the greatest opportunity will be consumers’ use for themselves. These observations were well ahead of the COVID-19 pandemic which accelerated debit use including government-to-consumer (G2C) delivery of relief payments via prepaid cards:
“Americans are finding more and more uses for prepaid cards in their lives as evidenced by the growth of different prepaid card categories revealed by the survey. Prepaid companies need to focus on the different use cases both for buying and funding as well as redeeming to keep up with the evolving use of these cards. The greatest opportunity is likely to come from how these consumers are using prepaid cards for themselves rather than for gifts,”– Peter Reville, Director of Primary Data Services, Mercator Advisory Group
Turning to recent prepaid card communications designed to engage an increasing user group, Mintel Comperemedia* identified changes to prepaid product marketing. We’ve synthesized key observations, along with thoughts from a marketing perspective:
- Prepaid product positioning appears to be evolving
- Core benefits remain important with additional benefits/features moving up in the hierarchy
- Driving new behaviors is the focus of recent marketing and incentives
Prepaid positioning appears to be evolving
While we don’t necessarily think the product will evolve entirely away from travel security – prepaid’s utility for travel is an attractive card benefit when travel is relevant – we don’t see travel security as a “positioning” for the category.
More importantly, we are in full agreement with Mintel’s analysis pointing to the strategic relevance of the trend to add perks and benefits. As the prepaid product is being continually re-imagined amongst the competitive set, the prepaid category is elevated as a solid option to traditional debit and credit cards.
The result of this trend? Mintel states that prepaid can now be better positioned “as a long-term option.” We think that observation is a key lever that can be more fully exploited with consumer marketing.
Core benefits continue to be important; additional benefits move up in the hierarchy
Prepaid has been embraced by consumers for several good reasons – the payment option requires no credit checks, meets everyday purchase needs, does not require a banking relationship and avoids over-extension as access to funds is limited to card load.
As prepaid is re-imagined, issuers are cherry-picking popular benefits and features of credit and debit cards, adding them to prepaid and making them more attractive and relevant – upgrades, rewards, mobile wallet capabilities, mobile apps, account alerts and management support.
One of the newer, timely features is prepaid card capability to provide early access to pay. The ability to gain 2-day early access to a paycheck is not yet a universal offering.
Driving new behaviors is a marketing focus
Mintel captured a range of communications pointing to common messages across the competitive set entered around creating and reinforcing long-term use. Mintel validated a growing use of sweepstakes promotions. These types of promotions can be effective ways to drive trial behavior and, when structured properly, can turn “give it a try” into a habitual use. In one instance, with Netspend, a sweepstakes promotion supports prepaid card acquisition, activation and subsequent direct deposit use. Below is a distillation of the recent sweepstakes captured – brand, promotion, desired behavior, prize/incentives.
Prepaid Card Sweepstakes Promotions
“Put away cash in your Walmart MoneyCard Vault”
|Move money from prepaid card to savings “vault”||Automatic entry into monthly drawing when cash is moved through app or website||$1,000 grand prize, hundreds of $25 cash prizes|
|Aline Card by ADP||Sweepstakes:|
|“So many ways for a chance to win” with purchases (two purchase tiers) direct deposit, cash load, card upgrade||Automatic entry into monthly drawing for each activity completed||Every month 10 winners will receive $1,000|
“$2500 Weekly Giveaway”
|“Just use your card” for purchases (two purchase tiers), direct deposit, cash load, card upgrade||Automatic entry into weekly drawing for each activity completed||Across 2020, five winners per week will receive $500|
“Want the power to double your payday?”
|Order your card, activate and use direct deposit||Automatic entry with every $100 direct deposit||Win up to $5,000|
The critical takeaway from a look at the category in aggregate – including the current environment, the evolution of prepaid as a product, the communications captured by Mintel:
There’s an opportunity for marketers to better keep pace with product changes by evolving to more meaningful positioning and aligned messaging. The growth of prepaid is a given and keeping pace with product evolution is required to successfully market the category.
* Source: Mintel Comperemedia. Prepaid Card Positioning Prepares for Growth. June 2020.Tags: COVID-19, credit card marketing, debit card marketing, financial services marketing, prepaid card product