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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