Prepaid Cards Are The Future For Millennials
When it comes to embracing alternative financial solutions and taking control of finances, one generation clearly stands out from the rest: millennials.
Weighed down by student loans and weak job opportunities – and fearing yet another possible financial crisis – tech-savvy millennials are looking to avoid fees, and other potential financial pitfalls, that can occur with traditional banking methods. Unlike previous generations that viewed credit as a tool to be used for financial success, millennials are quick to avoid anything that would add more debt–and more stress–to their bank accounts.
Traditional bank accounts are losing the battle to win over younger users because of a lack of technological innovation. Although the majority of millennials still use traditional banks, 88 percent want to avoid visiting a bank. Millennials want convenience, stability, and flexibility in managing their finances, and this is where prepaid cards come in. Millennials are also using smartphones to manage their finances, and prepaid cards are easy to access from their mobile devices.
Forty-eight percent of millennials who don’t have a chequing account say the reason is that they do not trust banks. And, among those who currently have a bank account, 45 percent use prepaid cards to avoid overdraft fees, 50 percent use them to avoid debt, and 46 percent to avoid cheque cashing fees.
Thirty-four percent of millennials also think that using a prepaid card would help them save for retirement — and this number more than doubles when asking current prepaid users, with 75 percent believing that prepaid cards will help with savings.
“These cards are much more mainstream than many people think,” said Tami Farrow, TD Bank’s head of retail deposit payment products. “One of the benefits that came through loud and clear in the survey is that millennials like the convenience, the simplicity and the predictability of the cards.”
The open loop prepaid card market in Canada is on track for an annual growth rate of 18.5% from 2015 to 2020, or an additional $9.4 billion growth, and millennials make up a large portion of this, according to market research firm Euromonitor International. Prepaid card transactions rose more than 30% between 2011 and 2014, from C$9.9 billion to $13 billion, The Canadian Payments Association reported.
“Millennials will continue to adopt emerging financial solutions, such prepaid cards, as a way to conveniently meet the needs of their increasingly mobile lifestyles,” says David Eason of the Canadian Prepaid Providers Organization.
According to a study by Global Cash Card (GCC), more than 60 percent of millennials now have a prepaid card. More than 5 million millennials in the U.S. do not have a chequing account, and it isn’t because they don’t know any better. In fact, millennials and current prepaid users are the most likely to have received education about payroll, with 61 percent of millennials and 83 percent of current prepaid users having received payroll education.
Millennials are now the largest generation in the U.S. workforce. Nearly 40 percent of millennials feel that a company cares about employee happiness when it pays attention to how employees want to receive their pay. Thirty-seven percent of all millennials feel “it would be valuable to have their pay loaded on a paycard each payday.” Numbers-wise, that amounts to over 29 million millennials in the U.S. alone. Sixty-four percent of millennials believe that paycards should be offered by employers as a payment option, and this number jumps to a complete 100 percent among current paycard users.
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