Visa U.S.A. says the system it is developing for reloading prepaid cards is aimed at attracting people without bank accounts and could lead to significant transaction growth.
The Visa Prepaid Load Network would let people to refill their cards at participating merchants, the San Francisco card association said Friday.
Visa currently offers several kinds of prepaid cards, some of which can be reloaded only by direct payroll deposit or government disbursements. The system would work with those cards, but Visa also plans to introduce a card that would work with the reloading system and would be funded only by customers. Todd Brockman, Visa's senior vice president for prepaid products, said several merchants have expressed interest in participating, though he would not name any of them. The system, which would require merchants to make changes to their point of sale systems, is expected to go live late this year or early next year, he said. Prepaid cards from all card companies were used for about $25 billion of transactions
in the past year and are held by 80 million people, who collectively earn $1 trillion a year, he said. In five years, Visa expects its annual prepaid card transaction volume to be about $50 billion. "Visa is really looking at the prepaid category as one of the key drivers of future growth," Mr. Brockman said.
A key part of that growth strategy is targeting the underbanke, including people without bank accounts and those with banking products they cannot use, such as maxed-out credit cards, he said.
Because they can be reloaded only by direct deposit, some of Visa's standard payroll cards do not address all of these customers' needs, he said. "The best way to load funds on a prepaid card is direct deposit, but there are other types of funds" that people receive, such as a paycheck from a second job. Mr. Brockman estimated that the underbanked spend $1.5 billion a year on check cashing fees. Merchants would charge consumers a fee to reload prepaid Visa cards, he said, but he would not say what the fee would be.
Jennifer Tescher, the director of the Center for Financial Services Innovation, a division of ShoreBank Corp. in Chicago, said the reloadable network would greatly increase the cards' appeal to consumers. "If you can only load the card through
direct deposit, it significantly limits the utility of the card." Visa's backing may also spur more people to use its prepaid cards, she said. "To see really broad adoption, consumers are going to need to trust that the money they load is going to get on the card."