Prepaid credit cards open a new world for the financially excluded

  • 26 Sep, 2013
  • Boris Bogaert
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A new MasterCard study in Europe unveils millions of financially excluded or underserved consumers.

MasterCard revealed these findings at the 2013 MasterCard PrePaid Conference last week. Six European countries were included in the study: UK, France, Italy, Spain, Poland and Russia.

The findings should help MasterCard and its partners to better understand what financial exclusion means to the millions of people within this group. What triggers their choices, and how does it affect their lifestyle? How can we improve our services to engage with this marginalised audience and build trust for the future?

The study focussed on 2 groups:

  1. Financially Excluded: those that do not have access to formal banking facilities
  2. Financially underserved: those that do not have access to any form of electronic payment

Financially excluded or underserved miss out on online benefits

The main reasons both groups share for not having a bank account are quite similar: one quarter says they don’t have enough money. Other reasons include “don’t want or need a bank”, and “don’t like or trust banks”.

While electronic payment methods should enable this group access bargains online, these groups use cash to pay for the rent or utilities and store their money in pots, boxes and hideaways at home. This limits their ability to benefit from the internet in general, where less expensive items are easy to find. Two-thirds own a standard mobile phone, but the same number is unaware of mobile banking.

Prepaid credit cards can really be the bridge

The research shows that 54% thought that prepaid cards are interesting while 39% thought prepaid credit cards are relevant for their financial needs. Since the population of unbanked and underbanked totals 93 million people in Western Europe, this is a major opportunity for the Prepaid  Credit Card players.

Prepaid can be the bridge to help these groups feel financially included, keep their money safe and learn more about budgeting. The groups should be educated about the possibilities available to them, to not only be financially included but also socially and technologically.

At this moment, 47% of the excluded have never heard of prepaid credit cards. Despite this limited awareness, 41% of all respondents recognise that they would benefit from prepaid credit cards by not having to carry around cash all the time. 25% acknowledged that prepaid credit cards would help them keep control of their spending.

The reaction to prepaid credit cards changes by sampled market and by demographic:

  • In the UK and France, respondents found the idea to generally be relevant to them, unique and different, and expressed more of an interest in applying for such a card
  • Conversely in Poland and Spain the concept performed less well on these metrics
  • Generally, the financially underserved are more interested in prepaid credit cards than the financially excluded, who appear to be more ambivalent
  • Similarly, the idea appears to resonate more strongly with respondents under 55
  • The idea is significantly less appealing to older respondents

The interview also asked for qualitative answers and found some key barriers to prepaid usage.

  • “I might lose my card, and anybody can use it” – 41%
  • “I would have to pay money to own the card / regular fees” – 30%
  • “Shops would not accept prepaid credit cards” – 7%
  • “I would never be able to put enough money on the card” – 6%

A basic bank account may not be sufficient to meet the needs of today’s consumers. Some form of electronic payment is necessary to include the financially excluded, offering access to e-commerce, mobile payments, etc. Prepaid credit cards give the financially excluded an easy way to get access to these services, but will also help them become more aware of financial planning.

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