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Prepaid and Gift Cards - US - June 2010

Although slowed somewhat by the recent recession, the gift and prepaid card business is starting to gain momentum again and is forecast to continue to show continued strong growth. Demographic trends in the United States are also benefiting the industry. The large number of un- and underbanked households in this country represent a tremendous market for prepaid cards; people who can’t afford or refuse to pay fees associated with bank account ownership are ripe for this product – and not many have been introduced to it.

Teens and college students who, thanks to the Credit CARD Act are no longer able to obtain credit cards, are also a potentially huge market – as long as their parents can be sold on the benefits. That shouldn’t be difficult, however, since the cards eliminate the need for parents to provide their own credit cards when their kids want to go shopping at either a brick-and-mortar store or online. Targeting both these groups will be especially important to card issuers as both are aiming for more economically robust futures that may very well include the need for more profitable bank relationships.

The themes that are reflected in this report include:

  • How technology is changing the nature of the prepaid card industry
  • The importance of segmented marketing to the successful promotion of these products
  • The impact of changing demographics on the card industry
  • How card issuers need to adapt to the changing economy in order to keep their product viable

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Data sources
        • Consumer survey data
          • Advertising Creative
            • Abbreviations and terms
              • Abbreviations
                • Terms
                • Executive Summary

                  • Industry overview
                    • Industry highlights – the consumer
                      • The recession has hit the industry hard
                        • The un- and underbanked represent major potential
                          • The Credit CARD Act changes the landscape
                            • Teens and college students are an important market
                              • Closed-loop cards are giving way to open-loop cards
                                • Prepaid cards are for more than just shopping
                                • Insights and Opportunities

                                  • Key points
                                    • Cards are benefits to unbanked and underbanked
                                        • Figure 1: Households use of prepaid cards, by banking status, December 2009
                                      • Community gift cards keep spending local
                                        • Prepaid rebate cards are growing in popularity
                                          • The teen market
                                          • Inspire Insights

                                              • Free Spending Teens are Back?
                                                • Credit vs. Cash
                                                  • Next for the Residential Mortgage Market
                                                  • Market Size and Forecast

                                                    • Key points
                                                      • Use of prepaid and gift cards is trending up
                                                        • Figure 2: Combined consumer use of prepaid and/or gift cards, 2007-09 (U.S. adults in millions)
                                                      • Closed-loop transactions and dollar volume
                                                        • Open-loop transactions and dollar volume
                                                          • Prepaid cards are increasingly popular
                                                            • And continued growth is expected
                                                              • Prepaid cards not yet heavily used for payments
                                                                • Figure 3: Payment methods adopted*, by consumers, February 2010
                                                              • Why people have prepaid cards
                                                                • Figure 4: Why people have prepaid cards, 2008
                                                              • Fewer people have prepaid cards, but more discard them
                                                                • Figure 5: History of adoption and discarding, by payment method, 2008
                                                              • Gift cards
                                                                • Who uses gift cards?
                                                                  • Figure 6: Gift card use, by age (users in previous 90 days), March 2010
                                                              • Competitive Context

                                                                • Key points
                                                                  • Key players
                                                                    • Figure 7: Global transaction market share
                                                                  • Branded cards are preferred
                                                                    • Gift cards are valuable incentives
                                                                      • Green Dot’s new fee structure rewards repeated usage
                                                                        • Bank fees are helping prepaid cards compete
                                                                        • Marketing Channels

                                                                          • Key points
                                                                            • The parent/teen connection
                                                                              • Using the internet
                                                                              • Market Drivers

                                                                                • Key points
                                                                                  • Un- and Underbanked
                                                                                    • The recession has hurt the industry
                                                                                      • Credit CARD Act
                                                                                        • Teens and college students
                                                                                            • Figure 8: Projected growth of current children/teen/young adult market, 2004-14
                                                                                          • Cards used for other purposes will help drive market
                                                                                          • Leading Companies

                                                                                            • Key points
                                                                                              • H&R Block is the leading bank issuer
                                                                                                • Figure 9: Leading prepaid card sellers based on purchase volume, 2008
                                                                                              • VISA is the leading card issuer – by far
                                                                                                • Figure 10: Largest global prepaid card issuers, by market share of purchase volume, 2009
                                                                                              • NetSpend
                                                                                                • GreenDot
                                                                                                • Innovation and Innovators

                                                                                                  • Key points
                                                                                                    • RegaloCard
                                                                                                      • Paragon Dynamix LLC
                                                                                                        • Target offers mobile gift cards
                                                                                                          • Partnering helps increase gift card usage
                                                                                                            • Personalized egift cards fill a need
                                                                                                            • Advertising and Promotion

                                                                                                              • Key points
                                                                                                                • Overview
                                                                                                                  • Reaching teens through their parents…and vice versa
                                                                                                                    • Different messages for different segments
                                                                                                                      • Email and direct mail ads
                                                                                                                        • Prepaid reloadable cards are the new way to manage money
                                                                                                                          • Figure 11: Facecard Prepaid MasterCard email, March 2010
                                                                                                                          • Figure 12: NetSpend VISA Prepaid card from MetaBank email, March 2010
                                                                                                                          • Figure 13: Readydebit VISA Prepaid card from MetaBank email, March 2010
                                                                                                                        • Gift card usage spurred by creative partnering
                                                                                                                          • Figure 14: Discover direct mail piece, March 2010
                                                                                                                          • Figure 15: TD Ameritrade/Apple gift card offer, March 2010
                                                                                                                        • VMS ads
                                                                                                                          • Alternative to a bank account
                                                                                                                            • Figure 16: ICE Card – 2010
                                                                                                                          • Audience targeted by celebrity
                                                                                                                            • Figure 17: RushCard – 2010
                                                                                                                          • Alternative to credit card
                                                                                                                            • Figure 18: Green Dot Prepaid VISA – 2010
                                                                                                                          • Help with staying on budget
                                                                                                                            • Figure 19: Vision Premier VISA—2010
                                                                                                                          • Using incentives to increase interest
                                                                                                                            • Figure 20: Readycard Prepaid VISA
                                                                                                                            • Figure 21: RushCard VISA—2010
                                                                                                                        • The Consumer

                                                                                                                          • Key points
                                                                                                                            • How many cards are purchased and received
                                                                                                                                • Figure 22: Consumers who purchased or received gift cards in the last 12 months, by gender, March 2010
                                                                                                                                • Figure 23: Consumers who purchased or received gift cards in the last 12 months, by age, March 2010
                                                                                                                                • Figure 24: Consumers who purchased or received gift cards in the last 12 months, by income, March 2010
                                                                                                                                • Figure 25: Consumers who purchased or received gift cards in the last 12 months, by race/ethnicity, March 2010
                                                                                                                              • Where gift and prepaid cards are purchased
                                                                                                                                  • Figure 26: Where consumers purchased gift cards, by gender, March 2010
                                                                                                                                  • Figure 27: Where consumers purchased gift cards, by gender, March 2010
                                                                                                                                • Why cards are purchased and received
                                                                                                                                  • Figure 28: Occasions for which gift or prepaid cards have been purchased, by gender, March 2010
                                                                                                                                  • Figure 29: Occasions for which gift or prepaid cards have been received, by gender, March 2010
                                                                                                                                  • Figure 30: Occasions for which gift or prepaid cards have been purchased, by income, March 2010
                                                                                                                                  • Figure 31: Occasions for which gift or prepaid cards have been received, by age, March 2010
                                                                                                                                • Reasons for not buying cards
                                                                                                                                    • Figure 32: Reasons for not buying gift/prepaid cards, by age, March 2010
                                                                                                                                    • Figure 33: Reasons for not buying gift/prepaid cards, by race/ethnicity, March 2010
                                                                                                                                  • Card preference
                                                                                                                                    • Figure 34: Preferred type of prepaid/gift card, by gender, March 2010
                                                                                                                                    • Figure 35: Preferred type of prepaid/gift card, by gender, March 2010
                                                                                                                                    • Figure 36: Preferred type of prepaid/gift card, by income, March 2010
                                                                                                                                    • Figure 37: Preferred type of prepaid/gift card, by race/ethnicity, March 2010
                                                                                                                                  • Getting consumers to buy cards
                                                                                                                                      • Figure 38: Attractiveness of card features, by gender, March 2010
                                                                                                                                      • Figure 39: Attractiveness of card features, by age, March 2010
                                                                                                                                      • Figure 40: Attractiveness of card features, by income, March 2010
                                                                                                                                    • Using cards to pay salaries
                                                                                                                                      • Figure 41: Receives salary by prepaid card, by age, March 2010
                                                                                                                                      • Figure 42: Receives salary by prepaid card, by income, March 2010
                                                                                                                                    • Desire to be paid via prepaid card
                                                                                                                                      • Figure 43: Desire to be paid via prepaid card, March 2010
                                                                                                                                    • Reasons for not wanting to be paid via prepaid card
                                                                                                                                      • Figure 44: Reasons for not wanting to have salary loaded on a prepaid card, March 2010
                                                                                                                                      • Figure 45: Reasons for not wanting to have salary loaded on a prepaid card, March 2010
                                                                                                                                    • Inducing consumers to use a prepaid card
                                                                                                                                      • Figure 46: Likelihood of using a prepaid card vs. debit/credit cards, by gender, March 2010
                                                                                                                                      • Figure 47: Likelihood of using a prepaid card vs. debit/credit cards, by age, March 2010
                                                                                                                                      • Figure 48: Likelihood of using a prepaid card vs. debit/credit cards, by income, March 2010
                                                                                                                                      • Figure 49: Likelihood of using a prepaid card vs. debit/credit cards, by race/ethnicity, March 2010
                                                                                                                                  • Cluster Analysis

                                                                                                                                      • Key points
                                                                                                                                        • Savers
                                                                                                                                          • Who they are
                                                                                                                                            • Characteristics
                                                                                                                                              • Opportunity
                                                                                                                                                • Simplistics
                                                                                                                                                  • Demographics
                                                                                                                                                    • Characteristics
                                                                                                                                                      • Opportunity
                                                                                                                                                        • Embellishers
                                                                                                                                                          • Demographics
                                                                                                                                                            • Characteristics
                                                                                                                                                              • Opportunity
                                                                                                                                                                • Cluster characteristics
                                                                                                                                                                  • Figure 50: Gift card clusters, March 2010
                                                                                                                                                                  • Figure 51: Where consumers purchased gift cards, by gift card clusters, March 2010
                                                                                                                                                                  • Figure 52: Occasions for which gift cards have been purchased, by gift card clusters, March 2010
                                                                                                                                                                  • Figure 53: Attractiveness of card features, by gift card clusters, March 2010
                                                                                                                                                                • Cluster demographics
                                                                                                                                                                  • Figure 54: Gift card clusters, by gender, March 2010
                                                                                                                                                                  • Figure 55: Gift card clusters, by age group, March 2010
                                                                                                                                                                  • Figure 56: Gift card clusters, by income group, March 2010
                                                                                                                                                                  • Figure 57: Gift card clusters, by race/ethnicity, March 2010
                                                                                                                                                                  • Figure 58: Gift card clusters, by Hispanic origin, March 2010
                                                                                                                                                                • Cluster methodology
                                                                                                                                                                • Appendix: Trade Associations

                                                                                                                                                                  Companies Covered

                                                                                                                                                                  • Abercrombie & Fitch Co
                                                                                                                                                                  • Aeropostale, Inc
                                                                                                                                                                  • American Eagle stores
                                                                                                                                                                  • American Express Company (The)
                                                                                                                                                                  • AnnTaylor Inc
                                                                                                                                                                  • Apple, Inc
                                                                                                                                                                  • Blockbuster USA
                                                                                                                                                                  • Citibank
                                                                                                                                                                  • Consumer Bankers Association
                                                                                                                                                                  • Diners Club International Ltd
                                                                                                                                                                  • Discover Financial Services Inc.
                                                                                                                                                                  • Experian
                                                                                                                                                                  • Facebook, Inc.
                                                                                                                                                                  • Federal Deposit Insurance Corporation
                                                                                                                                                                  • H&M Hennes & Mauritz
                                                                                                                                                                  • H&R Block, Inc.
                                                                                                                                                                  • Independent Community Bankers of America
                                                                                                                                                                  • J C Penney Company, Inc
                                                                                                                                                                  • JPMorgan Chase & Co
                                                                                                                                                                  • Macy's, Inc.
                                                                                                                                                                  • MasterCard Incorporated
                                                                                                                                                                  • Social Security Administration
                                                                                                                                                                  • SunTrust Banks Inc.
                                                                                                                                                                  • Target Corporation
                                                                                                                                                                  • TD Ameritrade Holding Corporation
                                                                                                                                                                  • The American Bankers Association
                                                                                                                                                                  • The American Financial Services Association
                                                                                                                                                                  • The Wet Seal, Inc
                                                                                                                                                                  • TowerGroup
                                                                                                                                                                  • Turner Broadcasting System, Inc.
                                                                                                                                                                  • Twitter, Inc.
                                                                                                                                                                  • U.S. Bancorp
                                                                                                                                                                  • U.S. Bureau of Labor Statistics
                                                                                                                                                                  • U.S. Bureau of the Census
                                                                                                                                                                  • Uno Restaurant Holdings Corp.
                                                                                                                                                                  • Visa U.S.A. Inc.
                                                                                                                                                                  • Waldenbooks
                                                                                                                                                                  • Walmart Stores (USA)
                                                                                                                                                                  • Wells Fargo & Company

                                                                                                                                                                  Prepaid and Gift Cards - US - June 2010

                                                                                                                                                                  US $3,995.00 (Excl.Tax)