Using Prepaid Reward Programs to Gain a Competitive Edge

Payments Leader

Posted on June 19, 2014

prepaid reward program
The rising popularity of prepaid cards has led to increased competition between financial institutions as they look for new ways to attract and retain customer loyalty. According to the Pew Charitable Trusts, American consumers deposited nearly $65 billion onto prepaid cards in 2012, and numbers are believed to have grown substantially since then.

As the proverbial pie continues to grow, providers have good reason to implement strategies that will secure a bigger piece. In turn, more and more are adding reward programs that give consumers a better reason to choose and use their brand.

Big Benefits

The rapidly-expanding prepaid card market has caused numerous financial institutions to seek out a competitive edge. For many, reward programs have been a great answer. Designed to increase transactions, profitability and market share on new and existing accounts, these benefits encourage consumers to use their prepaid cards for both major purchases and everyday spending. As users attempt to take advantage of these rewards, increased transaction revenue leads to more profitable card portfolios. Likewise, increased consumer loyalty leads to longer-term account relationships, which can pay big dividends for a provider. This value proposition is already proven and highly popular with credit and debit card programs, so it just makes sense to leverage within the prepaid space.

Who’s Doing What?

There are a variety of ways to prompt consumers to use their prepaid cards more often. That said, just about all center on the notion that users will receive a deal or reward each time they swipe their card.

Various providers have opted to do this through programs that offer reward points for every dollar spent on qualified purchases. VISA’s Prepaid Debit Card with 1-2-3 REWARDS® provides consumers with points they can use for free groceries, fuel discounts and other deals from a list of participating stores. Starbucks’ reward program allows users to accumulate “stars” each time they pay with a registered Starbucks (Prepaid) Card. Much like traditional points, these stars can be used to purchase free drinks, free food, free refills and more. A few major prepaid providers offer loyalty programs to customers when they use their prepaid debit cards anywhere Visa debit cards are accepted, including ATMs.

It’s easy to sell the benefits of why incentives of any kind should be used to support the acquisition, activation, usage and retention goals of prepaid issuers and providers, but the economic model doesn’t always make sense. However, there are viable options available to help support prepaid growth and adoption rates, such as:

  • Consider a points model to benefit from breakage and dramatically reduce program costs
  • Offer a competitive earnings structure to the consumer with attainable awards
  • Source low cost and high-perceived value items (e.g., digital downloads, cell phone minutes, etc.)
  • Add a “freebie” component such as automatic entries into an ongoing sweepstakes
  • Focus promotions on desired behavioral traits such as reloads, enrollment into direct deposit, yearly anniversary and more
  • Market the program features through all consumer access points (e.g., call center, online, mobile, etc.)

As more and more providers recognize the benefits associated with these programs, the market will get even more competitive, leaving providers without incentivized prepaid cards scrambling to catch up.


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Payments Leader

Payments Leader from FIS provides insights on credit, loyalty, fraud and emerging payments strategies through blog posts from our industry experienced authors.