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6 Prepaid Card Insights Businesses Need to Know

While credit and debit cards dominate most of the attention regarding payment methods, prepaid cards continue to grow in popularity thanks to their flexibility and the many innovative ways they can be used. Indeed, new use cases are continually emerging for consumer, government and corporate-funded prepaid card programs, improving the payment experience for end-users and cutting costs for businesses.

In addition, though prepaid cards are often thought of as a tool for the underbanked, prepaid cardholders actually represent every age group, income level and education level—both banked and unbanked. So, issuers have ongoing opportunities to serve all consumers, including those looking for flexible payment methods and others who might have been overlooked by the rest of the industry.

Here are the six most important findings issuers need to know, as identified in a new survey commissioned by Discover® Global Network and conducted by Aite-Novarica Group:

1. Prepaid cards are on the rise: A full 75% of survey respondents have used them.

Prepaid cards might fly under the radar as a dominant payment method, but they’re widely used by all demographics: from Gen Z to Boomers, regardless of income level. When asked if they had used various kinds of prepaid cards in the past year, threequarters of the survey respondents said they’d used at least one—whether they received one or bought one for themselves or for someone else.

2. Prepaid preference is shaped by purchase type and demographics.

Among the many ways to use prepaid cards, the survey showed they are most popular for online purchases (21% of respondents said they prefer them). Other places shoppers like to use prepaid cards: big-box stores, such as Walmart and Target (14%), grocery stores (12%), and gas stations (11%), and these figures are likely to grow in coming years.

When it comes to types of prepaid card, older Millennials—born between 1981 and 1989—prefer general-purpose reloadable (GPR) cards (67%), while Gen Zers are partial to open-loop gift cards (64%). Closed loop gift cards are owned by 68% of those earning more than $100,000 per year, and government benefits cards are owned by 62% of those earning less than $25,000 per year. 

3. Flexibility is an important driver of open-loop prepaid card usage.

Consumers show a clear preference for prepaid open-loop gift cards that they can use anywhere major card brands are accepted (64%), versus a closed-loop gift card that can be used only at a single retailer or a group of stores. Open-loop card issuers should focus heavily on broad acceptance—and the optimal customer experience it delivers—in their communications, including the fact that 99% of places that take credit cards in the U.S. accept Discover,® according to the February 2021 issue of the Nilson Report.

4. Prepaid payroll cards get employees paid faster.

Prepaid payroll cards are especially attractive because of their speed: 49% said they chose these cards over other methods because payments are faster, sometimes allowing them to receive funds even before their payroll date. Other reasons for their appeal include broad acceptance and easy access to banking features. These benefits can help attract and retain employees, and they’re especially valuable for hourly or gig-economy workers who might need access to funds as fast as possible.

5. Transit and parking-related prepaid cards are cost-effective.

Prepaid cards are convenient for consumers and good for the environment. When asked about the experience of paying for public transit and parking with prepaid cards, 43% said they save money, while 35% find prepaid cards motivate them to use public transportation more often.

6. And not surprisingly, consumers want prepaid cards that are 6. accepted everywhere they shop.

Survey respondents cited several features they’re looking for in a prepaid card, but most important was the ability to use their card wherever they shop: 91% said widespread acceptance was critical. This convenience, provided by open-loop card programs, is key.


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The information provided herein is sponsored by Discover® Global Network. It is intended for informational purposes, and is not intended as a substitute for professional advice.