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At $4.95 a month, JPMorgan Chase's new prepaid card undercuts even its student checking account. But its fee can't be waived with direct deposit or a high minimum balance — to get the card for free, users must link it to a JPMorgan Chase checking account.
May 8 -
Some banks are starting to notice the poor customers they have long ignored. Regions Financial Corp. is one of several banks expanding its check-cashing and the other "alternative" financial services that have long been offered by Wal-Mart and other non-banks.
November 10 -
One of the first large commercial banks to issue reloadable prepaid debit cards, U.S. Bancorp says its familiar brand gives it an edge over alternative providers.
November 1
Some banks see prepaid as an opportunity to attract new customers, but U.S. Bancorp (USB) has found that the cards are also popular with many existing customers.
About half of the people using U.S. Bank's prepaid card already have a relationship with the bank, according to Kevin Morrison, senior vice president of the bank's prepaid division. That figure does not take into account prepaid card customers who have accounts at other banks.
"We're finding half the people who take our [general purpose reloadable] card are already banked, and they're utilizing it for other purposes which run the whole gamut," from budgeting efforts to travel-related expenses, Morrison told American Banker in an interview at the annual Card Forum and Expo last week.
Reloadable prepaid cards have been prominently sold by non-bank companies including Wal-Mart (WMT), and have generally been considered a product for underbanked consumers who don't have or don't regularly use bank accounts.
But now banks are increasingly getting into the market. Several large banks, including JPMorgan Chase (JPM) and Regions Financial (RF), have launched reloadable prepaid card programs in recent months, in an
Prepaid cards are also generally exempt from recent regulations on debit card swipe fees, making them potentially more lucrative for the banks that offer them.
Morrison said that since U.S. Bank unveiled its reloadable card in
Though the bank expected that some existing customers would start using the prepaid card, Morrison said he was surprised by how many did: "The percentage threw me," he said.
Existing accountholders may be using U.S. Bank's prepaid card because they can load cash at branches for free, Morrison said, adding that that decision that was supported by bankers and tellers participating in the bank's product development.
"Telling them to offer reloading in the branch and then [charging] for it was kind of a reach," he said. "That was a key point in the development of it."
U.S. Bank is still focused on bringing in new customers with its prepaid card.
"This is about establishing relationships with new customers and strengthening existing relationships," Morrison said.
He argued that banks have an advantage over non-bank prepaid providers in terms of attracting and keeping customers, in part because when consumers "walk into a financial institution they are there to conduct financial business."
Unlike at Wal-Mart or other competitors, consumers "are not there to pick up a pair of jeans and a loaf of bread," he said, and so retention "is so much stronger already" at U.S. Bank.
Other banks are also offering incentives to existing customers who use their prepaid products. For example, JPMorgan Chase's
Morrison spoke after participating in a panel discussion at the conference, which was sponsored by American Banker and its publisher, SourceMedia.
