It's no surprise that prepaid cards are the preferred tool for reward programs and B2B mass payments. But there's a new trend emerging in the payments space - influenced by millenials - that needs recognition.
While millennials are being blamed for the decline in the paper napkin and diamond industries among others, they're making big moves for the payments industry - and specifically, prepaid.
Among this 18-34 year old generation, prepaid has been gaining a separate identity as a fully developed financial services instrument. And it's not because this generation is unbanked or don't use other financial services. In fact, 83% of millennials who use prepaid cards also have debit cards (1).
So what's the draw?
Well, one of the major factors contributing to millennial interest in prepaid is the avoidance of credit card debt. With nearly 48% of millennials dealing with student loan debt and concerned with how to pay it back (2), it makes sense that getting a credit card is not at the top of their to-do list.
And, with a set amount of available funds, prepaid helps regulate spending habits and avoid those pesky overdraft or interest fees. In this capacity, prepaid can act as a learning or budgeting tool for those working to not only pay back student loans but also get a handle on personal finances.
Aside from minimizing and managing debt, prepaid cards offer millennials assurances when it comes to potential fraud. Since prepaid cards are not attached to any expansive financial portfolios or personally identifiable information like SIN numbers or banking details, they allow for a less stressful purchase experience. Plus, with limited funds loaded onto prepaid cards, the likelihood of fraudsters getting their hands on all a millenial's hard earned money is slim.
So, what are the next steps?
With prepaid clearly becoming an increasingly popular choice among millennials, businesses need to step up to the plate and seriously consider their payout strategies. It's especially relevant when considering the growth of the gig economy and the breadth of its millennial workforce. Plus, we all know that cheques are no longer the optimal way to provide payments on a mass scale.
With prepaid, businesses can better cater to the needs of their workforce, particularly those who increasingly are adopting prepaid as a primary financial instrument. If your company is already offering alternative payout methods to your unbanked employees, you might as well offer it on a larger scale.
Another point to consider is that increasingly more employers are adopting prepaid as a payment method for payroll. This shift not only demonstrates business flexibility to potential new hires but also allows for innovative means of disbursements and integration with emerging fintech. What are your plans for progress? How do you plan to cater to one of the largest working generations?