When it comes to prepaid cards, if you can beat em join em

October 30, 2014 at 9:12 am Leave a comment

That is my most important takeaway from the FDIC’s biannual survey of unbanked and under-banked households that was released yesterday. If you are interested in getting these potential members into your branches-as credit unions  you have an ethical and legal obligation to try to do so-you better find a way of competing with the prepaid card.

“The survey results suggest that sizeable proportions of unbanked households and, to a lesser degree, under-banked households, relied on prepaid cards for many of the same purposes that households associate with checking accounts” Its authors conclude.

According to the report 7% of US households are unbanked   but a staggering 20 percent of households are under-banked meaning they have an account but have obtained services from nonbank alternative financial service providers in the last 12 months. The unbanked rate is down from 8.2%.

The survey reveals that  nearly 8% of all households use prepaid cards and 22.3% of unbanked households have used prepaid cards in the last year. Clearly this is a growing market and it’s going to get bigger but the report underscores just how difficult it is to break into this market. On the one hand almost half of unbanked prepaid card users plan to open up an account in the next year but here is the catch: Only 10% of all households obtained their prepaid cards from branches and among the unbanked, where distrust of banks is higher, only 4% do. It will be interesting to see how many of the unbanked really do open up accounts. I have my doubts because as prepaid cards offer more of the conveniences and consumer protections of traditional accounts many people won’t see the need to make that first visit to the bank or credit union.

I have always been squeamish about prepaid cards because people at the bottom rung of the financial climb need to open up accounts to climb to financial security. But prepaid cards are here to stay and if these survey results are accurate offering them may be a great way of exposing the unbanked to your credit union. Based on this survey if I was putting together a prepaid marketing plan here are the key points that I would want to get across to consumers looking for a Prepaid Card: Credit Unions are (1)Trusted partners that can (2) Offer you the convenience of prepaid cards and are (3) backed up with the safety and security that comes from belonging to  a financial institution protected by your friends and neighbors.

The report is a great resource. Here is a link.

https://www.fdic.gov/news/news/press/2014/pr14091.html

RIP Quantitative Easing

With the Fed’s announcement yesterday that it was no longer going to make additional purchases of long term treasury bonds and mortgage backed securities it means that the most aggressive long-term intervention by the Fed into the broader economy will be coming to an end almost. Remember that the Fed will still be rolling over its existing bond purchases so it will be continuing to exercise downward pressure on long-term interest rates. Yesterday’s FOMC statement also indicates that the fed is not concerned that the recent downturn in the global economy, which played such a big part in Wall Street’s recent gyrations, fundamentally alters the outlook for US economic growth. If the conventional wisdom is correct expect short-term rates to rise the middle of next year.

http://www.federalreserve.gov/newsevents/press/monetary/20141029a.htm

https://newyorksstateofmind.wordpress.com/2014/10/15/5-ways-the-international-economy-affects-your-credit-union/

They Might Be Giants

With their third world series win in five years the Giants must now be considered the most dominant team in baseball.  They can’t be considered one of baseball’s great flukes anymore. They win when it matters the most.

I like it when good teams consistently win championships because championships should be difficult to win. The Royals lost this year but their lose will make their eventual World Series victory that much sweeter. My only question is: Why is it that when the Yankees win four World Series in the 90’s with strong starters, dominant relievers and a solid lineup of great defensive players its considered bad for baseballs, but everyone celebrates the resurgence of the game when the Giants win with the same formula?

Entry filed under: Compliance, Economy. Tags: .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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