Prepaid and Gift Cards in the U.S., 4th Edition

• Executive Summary
  • Report Scope
  • Report Summary
    • Market size and forecast
    • Challenges and opportunities
    • Prepaid card cost, usage method & spend analysis
    • Direct deposit influence on card behavior
    • Demographic analysis
    • Payment instrument usage & cross-usage trends
    • Gift cards
    • Prepaid card users: financial institution relationship trends
    • Prepaid, debit and credit cards: usage trends by consumer loan type
    • Prepaid, debit and credit cards: usage trends by checking/savings account ownership
    • Prepaid, debit and credit cards: usage trends by banked status
    • Prepaid card users and mobile payments
    • Consumer gift card purchasing trends
    • Gift card retailer segmentation analysis
    • Top prepaid card brands
    • Prepaid card brand analysis
    • Prepaid card marketer & issuer strategies
    • Marketer strategies
    • Bank issuers
• Introduction and Overview
  • Introduction
    • Origins
    • Segmentation
    • Fees
    • Advantages
    • Drawbacks
    • Protection
    • Other terms
    • Competitive landscape
    • Competitive factors
• Market Size and Forecast
  • U.S. prepaid card market size and forecast
    • Table U.S. Prepaid Card Market Size and Forecast, 2009-2016
  • General-purpose "open-loop" prepaid cards
    • Table U.S. Open-Loop Prepaid Card Purchase Value & Purchase Volume & Interchange, 2009-2016; PIN and Signature Value & Volume, 2013
  • Private label "closed-loop" prepaid cards
    • Table U.S. Closed-Loop Prepaid Card Transaction Volume, 2009-2016; EBT and Other Prepaid Card Value, 2013
  • Additional context
    • Government prepaid card volume, transaction & fee analysis
    • Widening scope of distribution
    • Prepaid cards disperse 13% of government funds
    • Revenue and fee generation
    • Cash rules
    • Direct Express
    • A great deal for users
      • Table Direct Express Prepaid Debit Card Fee Analysis, 2013
    • But government prepaid programs losing luster
    • Employer payroll cards
    • Fee concerns and forced acceptance
    • Followed by a warning
    • Gift cards
      • Table Dollar Value and Dollar Share of U.S. Gift Cards Given in Past 12 Months, by Gifting Occasion, 2014
• Challenges and Opportunities
  • Increasing competition and regulatory onus usher in a new age
    • Major financial institutions help usher in a new age
    • What's the fuss?
    • In practice: Chase Liquid
    • Simplicity, low cost and transparency
    • Reshaping revenue generation models
    • Technological innovation breeds added value-and added revenue
    • Interchange gaining in importance
    • Increase transaction volume, please
    • Bring on the deposits
    • Fighting over direct deposit
    • Short life spans
    • Direct deposit makes a huge difference
  • It's not about the card, it's about the ecosystem
    • Breadth of features
    • Mobile or bust
    • Help me save!
    • How big is your reload network?
    • Well, how fast is your reload network?
  • Not a one-size-fits-all market
    • Segmenting customers
    • Customer service
    • Rewards are here, rewards are here!
    • Product discounts to incent trail
    • A new way to advertise
    • Serve: hero and educator
  • Tussling with cash and check
    • Electronic in, but cash out
• Prepaid Card Cost, Usage Method & Spend Analysis
  • Summary analysis
    • Direct deposit influence on card behavior
  • Monthly costs and usage
    • Table Average Monthly Prepaid Card Costs; Length of Use & Intended Use; Times Used for Purchase, Withdrawal & Reload; and Spend, by Gender, Age and HH Income, 2014
  • Presence of direct deposit
    • Table Share of Prepaid Card Users Linking Card to Direct Deposit & Length of Time Having Direct Deposit, by Gender, Age & HH Income, 2014
  • Direct deposit: influence on card costs and usage
    • Table Average Monthly Prepaid Card Costs; Length of Use & Intended Use; Times Used for Purchase, Withdrawal & Reload; and Spend: Direct Deposit vs. No Direct Deposit, 2014
• Payment Instrument Usage & Cross-Usage Trends
  • Summary analysis
  • Credit, debit, prepaid & gift card usage trends
    • Prepaid usage penetration growth rate tapers
    • Visa prepaid brand predominates
    • Gift card penetration declines
      • Table Consumer Payment Card Usage Trending, by Card Type, 2010-2014
    • 2010-2014 demographic trends: age and HH income
      • Table Consumer Payment Card Usage Trending: by Age & HH Income, by Card Type, 2010 vs. 2014
    • 2010-2014 demographic trends: gender and race/ethnicity
      • Table Consumer Payment Card Usage Trending: by Gender & Race/Ethnicity, by Card Type, 2010 vs. 2014
  • Prepaid users: debit and credit cards in wallet
    • 2010-2014 trends
    • Prepaid but not credit card transactors
    • Prepaid but not debit card transactors
      • Table Debit Card and Credit Card Mix among Prepaid Users, 2010-2014
  • Credit card and debit card users: prepaid cards in wallet
    • Only minor percentage of debit card and credit card holders use prepaid cards
    • Non-card users decline
      • Table Prepaid, Debit and Credit Card Mix among Debit and Credit Card Users, 2010-2014
• Prepaid Card Users: Financial Institution Relationship Trends
  • Summary analysis
  • The consumer banking relationship
    • Checking on the decline
      • Table Consumer Banking and Loan Product Penetration, 2010-2014
    • Consumer loan ownership: correlation to credit, debit and prepaid usage
      • Table Consumer Loan Products Types: Usage, by Prepaid, Debit and Credit Card Usage, 2012 vs. 2014
    • Digging deeper into card mix
      • Table Consumer Loan Product Types: Usage, by Prepaid, Debit and Credit Card Usage Mix, 2012 vs. 2014
    • Checking account ownership: correlation to credit, debit and prepaid usage
      • Table Checking Account Users/Non-Users & Consumer Banking Product Non-Users, by Prepaid, Debit and Credit Card Usage, 2012 vs. 2014
    • Card mix makes a big difference
    • 2012-2014 trends suggest that more prepaid users relying less on other card types
      • Table Checking Account Users/Non-Users & Consumer Banking Product Non-Users, by Prepaid, Debit and Credit Card Usage Mix, 2012 vs. 2014
    • Prepaid and banked status
      • Table Prepaid Card Usage Penetration: Unbanked, Alternative Financial Services Users, Underbanked, Banked & Fully Banked, 2014
• Prepaid Card Users and Mobile Payments
  • Summary analysis
  • Smartphone usage trends
    • Who's got a smartphone?
      • Table Percent of U.S. Adults Owning Mobile Phones & Smartphones, w/ Smartphone Share, by Demographic, 2012-2013
    • Unbanked and AFS users are smartphone enabled
      • Table Percent of Adults That Have Mobile Phone & Smartphone: Unbanked, Alternative Financial Services Users, Underbanked, Banked & Fully Banked, 2014
    • Prepaid users driving mobile payments
      • Table Mobile Payment in Last 12 Months & Monthly Payment Frequency: Prepaid Card Users vs. Non-Users, 2014
    • Driving mobile P2P and bill payment
      • Table Mobile Payment Methods Used in Past 12 Months: Prepaid Card Users vs. Non-Users, 2014
    • As well as mobile POS payments
      • Table Mobile Phone Usage at Point-of-Sale in Last 12 Months, by Payment Method: Prepaid Card Users vs. Non-Users, 2014
    • And internet payment methods
      • Table PayPal Payments & P2P Methods Used in Last 12 Months: Prepaid Card Users vs. Non-Users, 2014
• Consumer Gift Card Purchasing Trends
  • Summary analysis
    • Gift card occasion and recipient analysis
    • Gift card retailer segmentation analysis
  • Gift card giving in the past 12 months, by occasion and recipient
    • Top occasions, by dollar value
      • Table Dollar Value and Dollar Share of U.S. Gift Cards Given in Past 12 Months, by Gifting Occasion, 2014
    • Top recipients, by dollar value
      • Table Dollar Value and Dollar Share of U.S. Gift Cards Given in Past 12 Months, by Gifting Recipient, 2014
    • Gift card occasion and recipient dollar value matrix
      • Table Dollar Value and Dollar Share of U.S. Gift Cards Given in Past 12 Months, by Gifting Occasion and Recipient, 2014
  • Retailer segmentation analysis
    • Gift card purchases in past 12 months, by category: 2010-2014
      • Table U.S. Adult Gift Card Purchases: Percent Purchasing, by Retail Segment & Card Brand, 2010-2014
    • Gift card dollar value purchase share, by category: 2010-2014
      • Table U.S. Adult Gift Card Purchases: Dollar Value, by Retail Segment & Card Brand, 2010-2014
    • Gift card dollar value purchases per person, by category: 2010-2014
      • Table U.S. Adult Gift Card Purchases: Dollar Spent per Purchaser, by Retail Segment & Card Brand, 2010-2014, 2010-2014
    • Gift card purchases, by demographic
      • Table U.S. Adult Gift Card Purchases in Last 12 Months: Percent Purchasing, by Retail Segment & Card Brand, by Gender, Age & HH Income, 2010-2014
    • Card purchase spend, by demographic
      • Table U.S. Adult Gift Card Purchases: Percent Purchasing by Dollar Value, by Retail Segment & Card Brand, by Gender, Age & HH Income, 2010-2014
• Top Prepaid Card Brands
  • Prepaid cards used and used most
    • Banks and American Express make inroads but non-banks still dominate
      • Table Bank, Non-Bank & American Express Prepaid Cards: Have, Use Most & Used in Past 30 Days, by Generation and HH Income, 2014
    • Demographic analysis
      • Table Bank, Non-Bank & American Express Prepaid Cards: Have, Use Most & Used in Past 30 Days, by Generation and HH Income, Indexed, 2014
    • Prepaid card brands used and used most
      • Table Prepaid Card Brands Used and Used Most, 2014
    • Demographic analysis
      • Table Prepaid Cards Used: Bank, Non-Bank & American Express; Prepaid Card Brand, by Generation and HH Income, 2014
      • Table Prepaid Cards Used: Bank, Non-Bank & American Express; Prepaid Card Brand, by Generation and HH Income, Indexed, 2014
    • Categories and brands used most
      • Table Prepaid Card Brands Used Most, by Generation and HH Income, 2014
      • Table Prepaid Card Brands Used Most, by Generation and HH Income, Indexed, 2014
  • Prepaid card brand analysis
    • Chase Liquid
    • Target audience
      • Table Chase Liquid: Percent of Adults Who Used in Last 12 Months & Used Most in Last 12 Months, by Age & HH Income, 2014
      • Table Chase Liquid: Network, Loading & Withdrawal Options, Features & Benefits, & Costs, 2014
    • Contour
      • Table U.S. Bank Contour: Network, Loading & Withdrawal Options, Features & Benefits, & Costs, 2014
    • Bluebird
    • Features
    • Targeting the "alternative-to-banking category"
      • Table Bluebird by American Express: Features, Costs and Network Identification, 2014
    • Walmart MoneyCard
    • Differentiator: segmentation
    • Complementing the MoneyCenter
      • Table Walmart MoneyCard Basic, Plus & Preferred: Fund Loading & Withdrawal, Features & Benefits & Networks, Options and Costs, 2014
    • PayPal Prepaid MasterCard
      • Table PayPal Prepaid MasterCard: Features, Costs and Network Identification, 2014
    • Differentiator: Savings, rewards, and the PayPal mobile payments ecosystem
      • Table PayPal Prepaid MasterCard: Effect of Saving Program on Monthly Card Costs, 2014
    • Access, access, access … and maybe some credit, too
    • Walgreens Balance Financial Prepaid MasterCard
    • Relatively low-cost structure
      • Table Walgreens Balance Financial Prepaid MasterCard: Features, Costs and Network Identification, 2014
    • Differentiator: loyalty rewards
      • Table Walgreens Balance Financial Prepaid MasterCard: Effects of Rewards on Cardholder Costs, by Cost and Spend Scenario, 2014
    • Western Union MoneyWise
      • Table Western Union MoneyWise Prepaid Card Fees, 2013
• Prepaid Card Marketer & Issuer Strategies
  • Card association strategies
    • American Express
    • Enter prepaid
    • Giving them a new home
    • Current products
    • Enhancing the consumer value proposition
    • Traditional and new distribution channels to bring scale
    • Prepaid favorable economics
    • But does discount fee freedom give American Express unfair advantage?
    • The Serve platform
    • Can you say ISIS?
    • Customer growth on a tear
    • $6 billion loaded during 2014? No problem.
    • Demographics
    • Strong customer retention potential
    • Upgrade opportunity a marketing masterstroke
  • MasterCard
    • Targeted categories
    • Program management services
    • Prepaid card brands
      • Table MasterCard Prepaid Card Brand Names, Program Managers and Issuers, 2014
    • And a growing reload network
    • Key prepaid relationships and developments
    • H&R Block prepaid program
      • Table H&R Block Prepaid Emerald MasterCard: Service Charge and Interchange Revenue, 2011-2013
    • Western Union relationship
    • MoneyWise and My WU
  • Visa
    • Visa DPS
    • Prepaid card brands
      • Table Visa Prepaid Card Brand Names, Program Managers and Issuers, 2014
    • Visa ReadyLink
      • Table Visa ReadyLink Locations, 2014
  • Marketer strategies
    • Green Dot
    • Competitive positioning
    • Targeting low- to mid-income consumers across banking relationship spectrum
    • Prepaid products and services
    • Co-branded prepaid cards
    • Reload services
    • Green Dot Bank
    • Retail distribution model
      • Table Green Dot Retail Distribution, 2013
    • Reload services
    • Reload at the Register supplanting MoneyPak
    • Major relationships and initiatives
    • Walmart MoneyCard
      • Table Walmart and Other Retailer Share of Green Dot Revenue, 2010-2013
      • Table Green Dot Prepaid Card Brand Names, Issuer/Program Manager & Card Associations, 2014
    • Key card trends
      • Table Green Dot Prepaid Card Trends: Cards, Activated, Active Cards, Reloads, Gross Dollar Volume & Purchase Volume, with Per-Card Analysis, 2009-2013
    • Direct deposit as cardholder retention strategy
      • Table Green Dot Prepaid Card Trends: Direct Deposit, Reloaders & Non-Reloaders; Per-Card Revenue, Purchase Volume, Reloads and GDV, Q2 2012 vs. Q2 2013
    • Performance summary
      • Table Green Dot Revenue: Card, Cash Transfer & Interchange, 2010-2013
  • NetSpend Corporation
    • Products and services
    • Target audience
    • Growth strategy
    • Distribution channel
    • Traditional retail and direct channels gaining ground
      • Table NetSpend Revenue Share by Distribution Channel: Q4 2011 vs. Q1 2014; Merchant, Reload & Check-Cashing Locations, Q1 2014
    • Card brands
      • Table NetSpend Prepaid Card Brand Names, Issuer/Program Manager & Card Associations, 2014
    • Major client relationships
    • Issuing bank relationships
    • Direct deposit success on heels of strong card growth
      • Table NetSpend Prepaid Card Cardholder Analysis: Direct Deposit vs. Non-Direct Deposit, 2011
    • 20% rise in GDV puts NetSpend over $17 billion
    • Interchange share of revenue creeps up, suggesting major change
      • Table NetSpend Prepaid Card Revenue, Active Cards, Gross Dollar Volume, with Direct Deposit Metrics, 2007-2013
  • Blackhawk Network, Inc.
    • Distribution network
    • Gift Card Mall provides the foundation
    • Product range
    • Going mobile
      • Table Blackhawk Network Products and Brand Partners, by Product Category, Product Category Revenue Share, & Sub-Category, 2013
    • Bank partners
    • Performance trends
      • Table Blackhawk Network Products and Brand Partners, by Product Category & Sub-Category, 2013
      • Table Blackhawk Network Products and Brand Partners, by Product Category & Sub-Category, 2013
  • Bank issuers
  • The Bancorp Bank
    • Card programs
    • Going international
    • Performance trends
      • Table The Bancorp Inc. Prepaid Active Cards, GDV, Revenue by Type, Assets, and Deposits by Type, 2009-2013
  • MetaBank
    • Meta Payment Systems
    • Card programs
      • Table Meta Financial Group: Assets; Total and Payments Loans, Deposits & Revenue; Prepaid GDV, by Card Type, 2009-2013
  • Other players
    • Achieve Financial Services
    • Advent Financial Service
    • BofI Holding, Inc.
    • PreCash Inc.
• Appendix
  • Methodology
    • Consumer survey methodology
  • Market size methodology
    • Sources
  • Report table interpretation
    • Color coding
    • Indexing
  • Terms and definitions
    • Unbanked, underbanked and related definitions

Prepaid and Gift Cards in the U.S., 4th Edition

Gift and prepaid cards are popular as payment tools for American consumers and as gifts for their family and friends. In Prepaid and Gift Cards in the U.S., Packaged Facts forecasts that general-purpose prepaid card purchase values will grow 17% in 2014. Packaged Facts expects closed-loop prepaid card transaction value to grow at 3.6% as the prepaid and gift cards industry faces retail distribution saturation and stagnating consumer usage.

Competitors in the prepaid and gift cards industry are taking steps to ensure their products remain popular with consumers. Driven by the prospect of regulatory intervention and heightened competition, leading prepaid card marketers are adding protections found on debit card products, increasing fee transparency and reducing cardholder costs, as well as experimenting with budgeting and savings tools. As a result, prepaid and gift cards revenue generation models are placing greater emphasis on technological innovation and interchange to drive revenue growth.

Prepaid and Gift Cards in the U.S., 4th Edition provides industry participants with a wealth of insights to help them navigate this growing but quickly changing market. The report:

• Provides a market size and forecast for the prepaid card market, including trended transaction volume for general use (open-loop) and private label (closed-loop) prepaid cards; trended purchase value, purchase volume and interchange revenue generated by general use prepaid cards; plus a separate market size for gift cards.
• Explores a variety of prepaid card industry challenges and solutions, including revenue generation trend adaption, customer relationship building, and customer differentiation.
• Drawing from proprietary survey results, identifies and interprets key prepaid metrics, including cardholder usage costs, monthly spend, monthly purchase, ATM withdrawal, and reload transactions, length of use and intended length of use.
• Identifies the percentage of prepaid cardholders with direct deposit, and then assess the degree that direct deposit influences these above metrics.
• Gauges credit card, debit card, prepaid card and gift card usage trends during 2010, 2011, 2012, 2013 and 2014 by demographic, breaking prepaid card usage down by major association/brand. We also study prepaid, debit and credit card cross-usage trends over time.
• Assesses the relationship between prepaid, debit and credit card usage and consumer loan type usage; and the relationship between prepaid, debit and credit card usage and checking/savings account ownership. In each case, we analyze trends over time, from 2010 to 2014.
• Drawing from proprietary survey results, crafts a gift card market size segmented by gift giving occasion and recipient, providing for gift dollar value estimates for occasion and for recipient, as well as for recipients by occasion and for occasion by recipient. Drawing from the Simmons National Consumer Survey, the report also includes a market size for gift card purchases by retail segment for 2010-2014, with demographic analysis.
• Via proprietary survey analysis, the report identifies reloadable prepaid card brands that consumers use and use most, by prepaid card user demographic; and assesses relative penetration of bank- and nonbank prepaid cards.
• Provides in-depth analysis of several of the industry’s leading card brands, including cost, feature, and target audience analysis. Brands include Chase Liquid, Contour, Bluebird, the Walmart MoneyCard, PayPal Prepaid MasterCard, Walgreens Balance Financial Prepaid MasterCard and Western Union MoneyWise
• Explores prepaid card marketer & issuer strategies, focusing on card associations (American Express, MasterCard and Visa), marketers (Green Dot, NetSpend and Blackhawk Network) and issuers (the Bancorp Bank and MetaBank). Analysis includes competitive positioning, new product introductions, company innovations, and trended performance analysis.

SAMPLE INSIGHTS AND HIGHLIGHTS

·         Packaged Facts estimate that prepaid card transaction value will reach $274 billion in 2014, up 11% from 2013.

·         General-purpose (open-loop) prepaid cards, which overtook private label (closed-loop) prepaid cards in transaction value in 2011, continue to drive growth.

·         The retail distribution landscape is rather saturated, and gift card usage penetration rates have fallen during 2010-2014.

·         34% of gift card spend is for Christmas.

·         After lagging behind prepaid leaders GreenDot and NetSpend, major U.S. banks are making up for lost time.

·         The regulatory onus to reform an industry long criticized for high fees and agreements cloaked in ambiguity is very strong.  Driven in part by the prospect of regulatory intervention and in part by heightened competition, many leading prepaid card marketers are beating the CFPB to the punch.

·         The industry’s revenue generation models are being reshaped.

·         While activation and monthly fees are going down, technological innovation provides for the addition of a greater array of added-value services that can carry a fee.

·         Fee streamlining also means that interchange is becoming a more important revenue driver.

·         Given the short product use lifetimes, prepaid cards present unique challenges in building relationships between the provider and the user.

·         Thanks to the evolution of online and mobile technology, card loyalty is not garnered from the card itself, but from the features that increasingly surround it—the widening ecosystem through which the cardholder can engage easily with financial services products, services and educational tools.

·         Prepaid card users are not only ready for mobile payments, they are already leading users.

·         Prepaid card programs have taken the plunge into savings programs.

·         With terms like “underbanked” often thrown around without context, one could get the impression that prepaid card users are members of a large, undifferentiated mass. Prepaid marketers know this is not the case.

·         Loyalty rewards are finding their way into the prepaid card market.

·         More than 6 in 10 of Packaged Facts survey respondents say that the card they use the most has direct deposit.  Direct deposit has a pronounced effect on monthly card costs, usage frequency, and monthly spending volume.

·         18- to 34-year-olds are key prepaid card revenue drivers: they incur higher-than average costs spend more than average per month, and their transaction volume is also higher than average.

·         Cardholders with <$50K household incomes, often the intended prepaid card targets, report using the card less frequently than average.

·         The correlation between credit line loan usage and prepaid card usage strengthens among prepaid card holders who have either debit cards, credit cards or both.

·         By type, restaurants/ coffee shop gift cards are the most prevalently purchased, surpassing department/clothing/mall store gift cards.

·         While the general-purpose reloadable prepaid card market has historically been within the purview of Green Dot, NetSpend, The Bancorp Bank and MetaBank, the landscape is quickly changing, thanks to a host of market entrants.