Prepaid Financial Services: The Best Bet For Financial Inclusion

(Unless Derailed By Regulation)

Boston, MA — Consumer groups argue that prepaid products are an expensive substitute for a bank account; however those that study the needs of the low and moderate income (LMI) families and individuals have identified prepaid as the best bet for delivering low cost solutions to that market. This report provides perspective on this dynamic, explaining the reasons such differing perspectives exist and why, looking ahead, Prepaid Financial Services are better positioned than traditional financial institutions to address the needs of the LMI community.

With all this discussion, an easy assumption is that the prepaid market is well understood relative to demographics and size; and yet nothing could be further from the truth. This report evaluates the gray market’s impact on the overall size of the unbanked/underserved opportunity, explores how new entrants are expanding prepaid into markets well beyond the LMI community, and establishes growth projections for the Prepaid Financial Services market.

Despite the rapid growth and current size of the prepaid market, there has been little competition between the major suppliers, such as Green Dot, Netspend, Account Now, and UniRush, because they have pursued different go to market strategies — but stiff competition for channel ownership has already begun. Utilizing data from convenience store operators and channel analysis of new entrants including Western Union, InComm, and Black Hawk, Mercator Advisory Group has documented the upcoming channel conflict and makes recommendations for creating differentiated products that will deliver advantages for attracting channel partners in a crowded market.

In the report, Prepaid Financial Services: The Best Bet For Financial Inclusion (Unless Derailed By Regulation), Mercator examines the differing approaches of traditional Financial Institutions and Prepaid Financial Service suppliers to the LMI market. “When traditional Financial Institutions reach down market, they typically remain constrained by both their operational construct and geographic reach. At the same time, the major Prepaid Financial Services suppliers are squeezing costs out of their products even as they are delivered to an expanding geography which includes every convenience store, pharmacy, and grocery store. This expansion is delivering a level of convenience for consumers never before seen in a financial services product,” Tim Sloane, director of Mercator Advisory Group’s Prepaid Advisory Service comments.


Highlights of this report include:


With thin margins, Prepaid Financial Services providers must minimize costs and drive high volume. Learn how prepaid suppliers are driving costs down and distributing their products.

Prepaid suppliers find the revenue side of the profit equation is less well understood. This report describes the challenges suppliers face determining pricing elasticity.

This report identifies the Prepaid Financial Services that banks will begin to deploy more frequently.

There is a battle brewing around distribution — this report identifies how Prepaid Financial Services suppliers can meet the challenge.

Remote deposit capture is a game changer, and this report shows how and why.

Mercator Advisory Group identifies and defines a new critical Prepaid Financial Services metric.


One of 11 exhibits in this report:


This report is 32 pages long and has 11 exhibits.

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About Mercator Advisory Group
Mercator Advisory Group is the leading, independent research and advisory services firm exclusively focused on the payments and banking industries. We deliver pragmatic and timely research and advice designed to help our clients uncover the most lucrative opportunities to maximize revenue growth and contain costs. Our clients range from the world’s largest payment issuers, acquirers, processors, merchants and associations to leading technology providers and investors. Mercator Advisory Group is also the publisher of the online payments and banking news and information portal