Prepaid cards present a valuable opportunity for credit unions to strengthen their portfolios as well as enhance and expand member service. However, there are some challenges that can hinder prepaid card adoption and use.
Challenge: Security And Privacy Concerns
Prepaid cards have a reputation for having significantly fewer liability protections than other cards. Despite the added protections created by the Consumer Financial Protection Bureau’s Prepaid Accounts Rule, only 26% of people see them as a secure form of payment (Worldmetrics). Others might also avoid prepaid cards due to privacy concerns.
Strategy: Highlight And Include The Latest Security And Privacy Features
Building trust in the security of your credit union’s prepaid program requires both implementing the latest protection technology available and providing clear, easy-to-access information for cardholders.
Some tactics include:
- Create messaging that highlights the most up-to-date information about prepaid card liability protections available, including card registration and reporting requirements for gaining full access to these benefits.
- Implement tokenization technology. This adds another layer of protection to prepaid cards, which can also be highlighted in messaging to help overcome people’s security concerns.
- Work with a processor that uses the latest in fraud prevention monitoring services like AI to help better catch fraudulent transactions.
- Offer a robust app with your prepaid card that makes it easy for cardholders to monitor transactions themselves and turn their cards off immediately if they are lost or stolen.
- For those concerned about both security and privacy, your credit union can also highlight the fact prepaid cards aren’t tied to their checking accounts, so that information is safe and hidden more than with other types of card payments.
Challenge: Fee Structures
Unclear or extensive fees can deter card ownership and use. Many online resources warn consumers to watch out for the various fees that can be associated with prepaid cards.
Strategy: Optimize Fees
Compare the fees in your prepaid program to other prepaid card offerings to see where you might need to reevaluate your fee structure and make it more competitive. Better fee structures like free ATM balance inquiries and no charge for denied transactions can help cardholders feel more confident using their cards on a regular basis.
Challenge: Low Level Of Financial Literacy
Prepaid cards tend to be most popular among people who have had financial challenges in the past, including the unbanked. A major cause behind their difficulties is a lack of financial knowledge, which can also keep them from making full use of their prepaid cards to help build their financial health.
Strategy: Member Education
Financial literacy training can be a great opportunity to provide these cardholders with tips and insights on how to use their prepaid cards effectively to manage their budgets on a regular basis. These can include in-person and online classes as well as both print and digital resources.
Challenge: Declined Payments
When prepaid cards are declined, cardholders might turn to a backup form of payment and be less likely to use their prepaid cards in the future. Although many of the causes of these declines can be similar to those affecting other card types, there are some causes unique to prepaid cards. These can include inadequate funds on the card, cards that have not been activated, restrictions on card use, or automatic fraud triggers on transactions made with unregistered cards.
Strategy: Clear Communication
Clear communication and reminders to cardholders can help reduce the number of declined prepaid payments. When you issue a card, be sure cardholders know the importance of activating and registering their cards to avoid declined transactions. Also, be sure to highlight any restrictions on card use and any fees associated with their cards so they can plan for these expenses in their budgets.
Once members have their cards, send them reminders about the importance of checking balances to see if they have enough funds loaded for their purchase needs while staying on top of their budgets. Also let new cardholders know who to contact to resolve a decline should one occur.
With the help of these strategies, credit unions can practically address member and potential member concerns that hinder card adoption and use. In this way, credit unions can address some of the main challenges impacting the growth of their prepaid programs while better serving their membership base.
A strong partner can help credit unions effectively implement these strategies. At Envisant, our team helps credit unions build a strong portfolio strategy that meets member needs. To learn more about the resources we have available to help build your prepaid program, visit us at online.
