Prepaid cards have really cleaned up their image in recent years. When these cards first launched they were seen by some as being slightly predatory, like certain payday lender and cash advance services. Prepaid cards were considered to be marketed to the economically desperate, people who could not qualify for conventional credit cards, who didn’t have bank accounts, and were likely living check to check. The truth was somewhere in between. There were cards that marketed exclusively through daytime TV ads and preyed on the economically vulnerable. But there were also cards that were just a convenient way to transfer money for people who didn’t have, didn’t want or didn’t need a credit card or debit account.
Today money is almost all-digital. There are people being born today who will never touch paper money or coins. In the current economic environment, prepaid cards aren’t a gimmick or a scam, they’re just another way to pay and be paid, and actually quite necessary for many card holders. Many who carry debit cards from their bank and from services like Paypal still carry prepaid cards because of how convenient they are. If you need to do some shopping with a source that you’re not one hundred percent on, for instance, you can use a prepaid card without giving them all of your personal credit card information.
Prepaid cards can also be an easy way to pay your staff.
This can be especially useful in telecommuting. Paypal and Stripe are easy ways to send money on the internet, but not everyone carries those, so if you have a freelancer who does not use Paypal or Stripe, you can have them pick up a prepaid card and then send the money into their account. In an increasingly digital world, prepaid cards a convenient, accessible solution for many people who need to transfer funds quickly without a lot of headaches and paperwork.
American Express Prepaid Card: An Industry Leader?
American Express’s prepaid card brand is one of the most popular on the market for a number of reasons. AmEx Serve has essentially set the bar for the industry with a customer-first approach to the prepaid card business. Features like free direct deposit, the ability to add cash at more than forty five thousand locations and free withdrawals at twenty four thousand, free online bill pay and transfers between Serve Accountholders just made life easier f or people holding onto a Serve card.
So, it’s no wonder InComm jumped at the chance to buy the brand’s technology last Summer. The deal gives InComm exclusive rights for selling the prepaid cards across the US. The deal was signed mid 2017 and finalized in 2018. InComm is not buying the card out from under American Express, it’s more like a partnership. It’s more of a distribution deal than a buyout. The deal will actually help to empower both companies quite a bit, getting Serve cards into more wallets across the country to help further establish it as the industry leader in prepaid and rechargeable cards.
Serve began with an announcement that had AmEx purchasing Revolution Money for a reported three hundred million dollar company back in 2010, AmEx reported that they wanted to move away from prepaid cards as just a fast money option and towards the idea of using a rechargeable card as a digital checking account. For many, that’s what prepaid cards are, and without all of the fees, fines and penalties that go along with actually using a banking account.
Why Are Prepaid Cards Getting More Popular?
Anyone who’s ever had a bank account can tell you about the time they were five cents overdrawn and wound up paying off a thirty dollar fine as a result. Or when their account was empty, and the bank kept subtracting another five dollars from it every month because it didn’t have enough cash in it. Oddly enough, banks aren’t really changing their tune in response to all of the alternatives people have these days. They still make saving your money in a bank more expensive than stuffing it under your mattress. Well, their loss, because brands like American Express are making it easier than ever to get by without ever setting foot inside a bank. A rechargeable card effectively works as well as any debit card, but it’s more accessible, convenient, and, in the case of Serve, at least, generally quite a bit cheaper.
It’s not just prepaid cards, though. People are turning to Paypal and Stripe as their primary option for saving, spending and receiving money. They’re using credit unions. Banks may not be a “thing of the past,” but they’re no longer the only dominant force in the market. People have more options than ever, and people are taking advantage of those options. You don’t need to be beholden to whatever rules the bank lays out for you, you can just go save your money somewhere else.
So AmEx Serve is both a leader in changing the way people spend and receive money, and just a really smart opportunity for American Express. It is rising to the top of the industry in part because American Express was smart enough to strike while the iron was hot. More prepaid cards are popping up every day, but for the most part they’re a little late to the party. The writing has been on the wall for at least a good ten years now that people just don’t trust banks like they used to, and that the technology makes it easier than ever to do something about that. But not every brand was smart enough to invest in the growing field of prepaid and rechargeable cards when they still had the opportunity to get in at the ground floor.
This may have something to do with the sort of shady stigma that was attached to the prepaid card industry back in 2010 and earlier. People assumed many of these prepaid card sellers to be fly by night hustlers, looking to make a quick buck on gullible suckers and then close up shop once they’d turned a tidy profit. What actually wound up happening is that people treated these cards like a real, viable alternative to banking, debit and credit cards, and then smart, legitimate, multinational companies climbed on board, and the rest is history.
So Why DO Some People Still Use Banks?
Although prepaid cards have a lot of advantages over banks, there are still quite a few things that banks can do that prepaid cards cannot. The same goes for credit cards. Prepaid cards are a convenient, easy, cheap, accessible way to move money around, but it’s more like a digital wallet than anything.
The simple fact that Serve is an American Express card should tell you that these cards are not really in competition with credit cards. Maybe banks are losing a few customers to prepaid cards, but credit cards and rechargeables are two completely different markets. For instance, you can’t build your credit with a prepaid card. There’s nothing about a prepaid card that helps you prove you’re a reliable borrower. Anyone can buy a prepaid card, you can buy one for someone else as a gift if you like. So there’s no line of accountability to be drawn from the card to its user.
It is probably fair to say that prepaid cards are used by many who cannot get a credit card for one reason or another. Again, this is not eating into the credit card market, because, after all, these are people who can’t get a credit card, not people who choose not to. This is one of the reasons why prepaid cards were seen as kind of shady for many years.
Certainly if something is being sold to people who have no other options, there must be something dishonest about it, right?
After all, the desperate are the easiest to take advantage of. There are plenty of credit cards out there for people who want to build their credit up from a bad score or from scratch, but prepaid cards don’t really fill that spot. They’re just a fast, convenient way to get money.
Likewise prepaid cards may be taking customers away from banks when those customers only want somewhere to put their money so that they can be paid by direct deposit or buy things online. But prepaid cards don’t really have much appeal for people who are looking into savings accounts, hoping to earn interest on their savings, or looking to establish a relationship with a bank. If you run a small business and are taking out a loan, prepaid cards can’t really help you there. Any money that you don’t have to put into the card, you can’t get from the card. Banks do offer a number of things that prepaid cards do not.
Of course that’s not the only reason why some people are still using banks. Some people may simply not know that prepaid cards have come a long way from the daytime TV ads you’d see back in 2008. They might not have to worry about being overdrawn because they always have enough money in their account. Maybe they’ve just been using a local bank for so long that they don’t have much motivation to switch how they save and spend their money, or perhaps their financial demands exceed the capacity of a prepaid or rechargeable card. Whatever the reason, prepaid cards are great, but they’re not for everyone, as much as American Express may be trying to change that with the Serve card.
Cash is, more and more, becoming a thing of the past. Fewer and fewer transactions involve anything actually changing hands at all. If you remember back in 2010, there were plenty of shops that did not have card readers. Small gas stations, local diners and so on. Now even the smallest business in the most rural area is going to accept Paypal, Stripe, Serve and everything else. You can accept payments with your phone now. It is very likely that in another ten years you might not even remember what a dollar looks like. Digital currency is fast becoming the standard.
In the new economic environment, it simply doesn’t make sense not to have some way of paying for things and accepting money digitally, and that’s becoming more and more true every day. In light of that, it is easy to imagine a day when everyone is carrying prepaid cards. When someone owes you twenty bucks, it might make more sense to hand you a prepaid card than it does to hand you a twenty dollar bill. There’s simply not much reason to carry cash anymore as even vending machines accept cards. Serve may or may not remain the industry leader, but the era of the prepaid card is fast arriving nevertheless.