E-commerce driving up prepaid card use, report says

Consumers are turning more to prepaid cards to pay bills and make online purchases, according to a new report.

Prepaid cards are on the rise especially among members of Generation Y and consumers without easy access to banks, according to a new report from Javelin Strategy & Research.

Some of the reasons being attributed to the recent growth of prepaid card use is that this method offers financial independence and help to establish credit.

E-commerce, in particular, is driving up prepaid card usage as consumers have started to use them more to pay bills and make online purchases.

Additionally, Javelin researchers compare prepaid cards to cash, citing that the latter is generally "unreachable" when shopping online. For "underbanked" customers, or those who don't have access to payment (credit or debit) cards or checking accounts, prepaid cards fill a void.

Otherwise, these consumers have to rely on other options, such as eBillme, that aren't necessarily provided by all small and major retailers.

There's also another incentive to prepaid cards that rings similar to emerging mobile commerce solutions: it's an easy way to track loyalty points and memberships, among other purchasing statistics among consumers.

Javelin researchers cited the PayPal Prepaid MasterCard, which can be used anywhere MasterCard is accepted, making it a very versatile option. Furthermore, this card offers paypack rewards when linked to a PayPal account.

Right now, prepaid cards currently only account for 8 percent of the total online payments volume. Yet prepaid cards’ dollar volume is predicted to increase from $21 billion in 2011 to $32 billion in 2016 as analysts expect that the underbanked population is actually going to grow.



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