5 Steps to Making Prepaid Cards Work for You
Heinrich Marketing
Learn why the time is right for prepaid cards vs. credit cards — and get a five-step guide to dressing your prepaid program for success.
Looking for a game-changer? The prepaid card transaction market is expected to reach $257 billion this year, up from $63 billion in 2004. Prepaid is where the growth is when it comes to payment methods —and it’s not just for gift cards and phone cards anymore.
Whether you’re a retail chain, a bank or a service organization, prepaid cards hold huge new revenue and profit opportunities for a wide range of industries and brands.
We asked prepaid card expert Keith Rose, Heinrich's strategic partner, president of Peak Results Marketing, to share his best advice to marketers looking for innovative ways to generate new revenue streams.
What is a prepaid card?
From gift cards and reloadable Visa and MasterCard credit-alternative cards to transit-fare cards, there are as many types of prepaid cards as there are industries reaping their benefits today.
Also known as a stored value card, a prepaid card is “a trackable alternative to cash that’s less expensive to process than a check,” says Rose. And unlike a credit card, it’s easy to get. “Anyone can have a prepaid card. You just go to a store to pick it up.”
That’s a big reason reloadable prepaid cards have begun attracting more attention over the course of the recession — even though the concept has been around for about a decade, its benefits have new relevance for consumers whose job and credit options have shrunk.
According to the 2009 prepaid cards industry forecast report by the Center for Financial Services Innovation, more than one-third of the 40 million underbanked individuals in the United States would rather use a prepaid card than a checking account for basic financial transactions if costs were equal. Defined by the FDIC as the 10 million households in America without an account at a financial institution, underbanked and unbanked consumers say they appreciate the convenience, transparency, and privacy of prepaid cards.
How Wal-Mart turned a profit on reloadable prepaid cards
When Heinrich and Peak Results developed positioning strategy for the Wal-Mart Money Card, “We were challenged with increasing awareness, acquisition and reloads,” says Rose. “But the first hurdle was, how do we articulate a very complex thing in a very simple way?”
“We helped Wal-Mart come up with the Money Card concept that took a lot of confusion out of a very complex product,” says Rose. “We built messaging and creative using very straightforward language and graphics that focus on the core benefits — especially the fact that you can reload this card, putting money back in and reusing it.”
Another key to WalMart’s success with prepaid cards: a maverick fee structure geared aggressively toward incentivizing ongoing usage.
Some brands have struggled with the profitability of prepaid cards because the fees to use and reload the card were so prohibitive, many consumers would toss them after one use.
“But Wal-Mart really streamlined the pricing,” says Rose, noting WalMart’s low transaction fees and simple, automated pricing structure — every reload costs $3. “The strategy is, reloading brings people into the store every time.”
5 steps to success with a reloadable prepaid card
“The numbers are going up,” says Rose, pointing to the overall growth of prepaid card transaction volume. “And there’s going to be a shake-out in the industry as to who’s providing the service.” The key to being one of those providers, he says, is starting with these five strategic moves — the keys to making your prepaid card program stand out, take hold and make money.
1. Define your segmentation plan.
“Who are you going after and how do you want to connect with them?” Rose asks. “Travel, gifting, reloadable credit card alternative? People who can’t get credit?”
“Prepaid cards serve different purposes for different consumers,” notes a Center for Financial Services Innovation report, underscoring Rose’s advice. “Developing a successful prepaid card program requires segmenting the large, diverse underbanked market and matching the marketing and distribution strategy to the market segment.”
Within the reloadable prepaid card market alone, Heinrich Marketing has identified nine sub-groups to target — from the underbanked and credit-challenged to students away at college and families looking for practical gift options and ways to help support family members financially.
2. Make user education a top priority.
“User education, especially via point-of-sale signage and direct marketing, is crucial,” says Rose. He advises clients interested in prepaid card programs to keep messaging in point-of-sale signage, direct mail and other touchpoints simple, visual and straightforward. For example, while the benefits of the prepaid concept are numerous, Heinrich guides new prepaid clients to prioritize the best three benefits in creative messaging and graphics.
“Many brands are also getting away from paper,” Rose points out, “using text messages and email to increase ongoing usage, retention and reload rates.”
3. Sidestep sticker shock.
“It’s crucial that you automate and minimize reloadable card fees to increase total usage,” says Rose. He advises taking a cue from Wal-Mart by setting up a fee structure aimed at maximizing reload volume and lifecycle. “The longer that card gets actively used, the more profitable it becomes for your company,” Rose explains.
4. Customize your creative and messaging by segment.
Positioning, imagery, messaging and offer/pricing should all be uniquely targeted to specific segments. Rose says this is your ticket to higher cumulative revenue and profitability of your prepaid card program.
For example, to make the benefits of a prepaid card crystal-clear for a multilingual customer base, Rose and Heinrich developed point of sale signage versions emphasizing iconic graphical representations of reloading the card and reusing it.
Keep in mind that while your creative should be tailored, format and templates can be common across the segments — that’s one way you’ll gain cost-efficiency, though multiple uses of each card should still form the core of your ROI logic.
5. Get your team up to speed before you launch.
Consider this a hand-in-hand aspect of customer education — it’s essential to train your retail and customer-facing employees on exactly how your prepaid card program works, and how it’s different from other payment methods. Market the card to your teams with materials that highlight the benefits in clear, simple terms. All your representatives need to a) understand the product and program, so they can quickly and clearly answer customer questions; and b) get excited about it, so they’ll suggest it to customers.
Heinrich Marketing can help you optimize a prepaid card strategy for your brand and find the best ways to communicate its benefits to distinctly different customer segments. Read our case studies or contact us for more information or a prepaid card program scenario tailored to your goals and audiences.