On January 17, Bloomberg Businessweek published an article entitled “Prepaid Debit Cards for Beiber Fans–and Everyone Else” (By Carter Dougherty and Margaret Collins).
This article makes some interesting points and observations:
Prepaid debit cards offer an opportunity for new revenue streams for financial institutions and others.
The regulation of these cards is “by patchwork.”
Prepaid debit cards and issuer practices are under current review by the CFPB.
Many of these cards are exempt from Dodd-Frank Durbin Amendment swipe fee limits and other fee limits.
Next Step Network is charging a $14.95 monthly fee for its card that cannot be used by recovering substance abusers at liquor stores or bars.
Not all issuers keep cardholder money on deposit in FDIC-insured accounts.
Issuer BillMyParents is using Justin Beiber to pitch its card with a likeness of Beiber on it.
Traditional financial institutions are competing with the like of the Bluebird pre-paid debit card sponsored by WalMart and American Express (which has no monthly maintenance fees).
The article’s bottom line stated: “With prepaid debit cards forecast to hold $168 billion in U.S. funds by 2016, big banks and small companies are rolling out new offerings.”
We would add that this is certainly a creative way to provide a service to the unbanked and under-banked while generating significant non-interest revenue. Stay tuned to any efforts by the CFPB to rain on this parade, Beiber fever notwithstanding.
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