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Consumer-focused regulations, in general, should reflect what financial products actually do, not the technicalities of who issues them or what legal status they hold.
November 29 -
If your bank is gung-ho to issue prepaid cards, think again. Focus on how to retain checking account customers, rather than emulating Green Dot and Chase and issuing fee-based "prepaid cards" as a new (already outdated) product.
October 16 -
The simmering controversy over American Express' Bluebird card typifies a classic debate: When do regulations that ostensibly protect the public from shady operators really just protect incumbent businesses from competition?
October 22 -
Amex's Bluebird card account, exempt from Durbin and assertedly from bank regulation, is likely to generate high interchange. Consumers, banks and Amex won't pay for these checking accounts. Merchants (excepting Walmart) will.
October 22
Last year, I wrote a
That stigma appears to have ebbed a bit over the last year. You could argue that this is due to traditional financial institutions, like American Express (AXP) and JPMorgan Chase (JPM), introducing low-fee products in the space. Or you could say the rapidly growing number of underbanked customers opting for innovative nonbank prepaid alternatives has made it harder to deny these products' worth.
Whatever the cause, the ultimate effect – a growing list of competitors entering an increasingly respectable payments space – makes me inclined to offer one more piece of advice to prepaid providers as we head into 2013: If you want to be taken seriously, please, please, please ditch your celebrity partners.
I say this following the recent announcement that prepaid provider BillMyParents is entering into a "strategic partnership" with teen idol Justin Bieber. But, truthfully, I've always found the relationship between celebrities and prepaid cards a bit baffling. This question just always seemed obvious: Why does an industry so often criticized for offering high fee structures to low-income consumers think it can win over critics by adding members of the 1% to the payroll?
To be fair, music mogul Russell Simmons, sports star Magic Johnson and personal finance expert Suze Orman essentially own the prepaid companies they run. And Yankee third baseman Alex Rodriguez – whose Dynasty Card is an offshoot of Simmons' RushCard – is an investor who makes (or loses) money based on the performance of its portfolio.
BillMyParents declined to offer specifics about the role Bieber would play or how he is being compensated, but it sounds as if their pairing will fall more along the lines of a traditional endorsement deal (the Securities and Exchange Commission filing disclosing the partnership certainly
Their
It sounds familiar because celebrity prepaid product partnerships are often linked to financial literacy, or, perhaps more specifically, a need to reach a demographic the company believes needs this literacy.
RushCard told me Simmons established the company "with the sole objective of empowering those left behind by the mainstream banking system." Similarly, Mango Financial says its partnership with the comedian George Lopez "is focused on the commitment to financial empowerment" and "was specifically established to raise awareness of Mango's low fee products and services."
I won't question intent, because, quite honestly, it's irrelevant. No matter what label you assign them, celebrities will do little to help prepaid providers, primarily because celebrities have a long and sordid history of endorsing the predatory products the industry as a whole needs to distance itself from.
Consider the late Gary Coleman's
Granted, celebrities have also lent their faces to traditional financial products. This works in varying degrees because banks and credit card issuers, while certainly in need of their own reputational revamp, (a) aren't aiming to find a foothold and (b) largely don't pair celebrities with products completely out of sync with their lifestyles.
An American Express ad campaign that featured several celebrities, including
Conversely, the notion that
The use of a celebrity also won't do much to widen a company's target audience, something that should be a concern, even for niche prepaid providers, as more and more competitors enter the space.
If a celebrity is particularly passionate about promoting financial literacy (and believes a particular prepaid product is the best way to do this), then I suggest letting them do so from the sidelines.
Alternately, if selling a ton of prepaid cards to your target audience is the ultimate goal, than fine, bring on Bieber (and admit that's why he's around). He's certainly good at
But if the aim is to establish credibility with consumers and stand out among a widening field of competitors, then leave the famous faces out of your marketing materials.
Jeanine Skowronski is the deputy editor of BankThink. You can contact her at