Prepaid debit cards are gaining favor among the underbanked, yet only a minority of this consumer segment uses them, said Aite Group (Boston).
The firm conducted a study of 400 check-cashing store users and examined the characteristics of those underbanked consumers who use prepaid debit and possible opportunities for growing adoption of this payment instrument among this demographic.
Aite Group divided the market into five segments based on surveyed customers' awareness and ownership of the product, as well as their expectations for adoption in the future. Segments include: Adopters, Rejectors, Unreached Prospects, Purchase Intenders and Lapsed Owners. By examining the characteristics of and barriers to adoption for each segment, Aite Group said it identified marketing strategies to appeal to each group of targeted end-users.
Unreached prospects totaled 17 percent. Meanwhile, 30 percent of respondents were classified as Adopters and 43 percent fell into the Rejectors category.
"Prepaid debit cards are in the initial stages of their product life cycle. As such, there is ample opportunity to grow product usage," said Gwenn Bzard, research director with Aite Group and author of the report, in a statement. "Given the distinctiveness of the target consumer segments for this product, marketing programs should be specifically tailored to the needs of each segment."
The study comes close on the heels of an FDIC report on the underserved in which the agency said it plans to ramp up efforts to bring financial products to this consumer segment. The "FDIC National Survey of Unbanked and Underbanked Households" showed that over a quarter (25.6 percent) of U.S. households fall into the underbanked/unbanked category. It asserted the majority of these households are disproportionately from low-income and/or minority areas. The survey was conducted by the U.S. Census Bureau.
"Access to an account at a federally insured institution provides households with an important first step toward achieving financial security—the opportunity to conduct basic financial transactions, save for emergency and long-term security needs, and access credit on affordable terms," stated FDIC chairman Sheila Bair in a release. "By better understanding the households that make up this group, who they are and their reasons for being unbanked or underbanked, we will be better positioned to help them take that first step."