Every Credit Card Executive Needs to Know the Nuances of Asset-backed Securities
GPR prepaid debit cards were developed to provide consumers
who are underbanked and unbanked with a method to perform financial
transactions in a modern form utilizing a network-branded card rather than by paying
in cash. This was not only for convenience and safety purposes but also for financial
inclusion. The prepaid debit card has not only accomplished this for the
underbanked and unbanked (Figure 1) but has become a
mainstream financial service product that is utilized by persons no matter
their banking status.
Figure 1: Financial inclusion has
improved significantly since 2015.
of Governors of the Federal Reserve System, “Economic Well-Being U.S. Households in 2017”
A GPR prepaid debit card functions like a checking account but
is typically not offered for purchase through a financial institution although
there are exceptions, most notably Chase, US Bank, and BB&T. Rather, GPR
cards are typically offered by money transmitters like Netspend, PayPal, and Western
Union as well as alternative financial service providers such as check cashers
like Ace Cash Express. All prepaid debit cards are ultimately issued from banks
that maintain the associated dollars in a pooled fund rather than in individual
accounts for each cardholder (like a traditional checking accounts). GPR
cardholders are not subject to ChexSystems or TeleCheck qualification because
their prior history with financial institutions and prior merchant activity are
not considered for these prefunded card accounts. Funds are said to be “loaded”
on the card rather than “deposited” in an account because the card are funded
in advance with cash. During the last five years or so, it has become possible
for users to load a check to a prepaid debit card by means of mobile remote
deposit capture (mRDC). In this case, although the cardholder or card account
doesn’t require verification that there are no past negative credit events, the
current situation is verified. The check deposited must be verified as “good”
before the funds are credited or “loaded” to the card account.
This report, General Purpose Reloadable Prepaid Card Portfolio Measurements and Growth Strategies, discusses measurement techniques and key performance indicators (KPIs) for GPR open-loop prepaid cards.