Industry Views: Building Long-Term Cardholder Relationships with Financial Literacy
Despite what you’ve been seeing in the mainstream media recently, many prepaid card providers have not only lowered fees in the last 
few years but many are educating cardholders about how to avoid fees altogether. While it may seem counterintuitive for a thin-margin industry to show consumers how to avoid fees, today’s prepaid providers are looking for long-term profitability. And that means building long-term relationships with cardholders. One way to do this is by promoting financial literacy initiatives to help cardholders get ahead, which builds customer loyalty at the same time.
Paybefore reached out to industry leaders to find out how they are promoting financial literacy and why it’s important to their business.
| Question 1: What are you doing to promote financial literacy among prepaid cardholders? |
.gif "Lisa McFarland") Access to electronic payments empowers financially underserved individuals, providing them with more choice and greater control over their money and enabling their inclusion in the financial mainstream. Once people have access to financial products like prepaid, it’s important they know how to use them responsibly. That’s why Visa provides free financial education programs around the world. In 2002, Visa launched its award-winning Practical Money Skills for Life Website that covers a range of financial literacy topics. To date, the program has reached more than 20 million people worldwide. Additionally, Visa works with banks and government agencies around the world to develop financial literacy programs that educate consumers on prepaid as well as other available electronic payment platforms.
—Lisa McFarland, Head of Consumer Prepaid Products, Visa Inc. |
| When we at MasterCard hear financial literacy, we naturally think of financial inclusion and our commitment to provide sound financial products and services that help underbanked communities move into the financial mainstream. Financial education and literacy are part of our commitment and we offer a range of programs tailored to consumers. Two examples include:
In the fall, we will formally launch Your Money Smarter, an SMS-based financial education program. Consumers opt in via their mobile phones and receive budgeting, planning, spending and saving strategies through a series of text messages, including Q&A, tips and fun facts. Last spring, we launched PayPerks with Treasury and Comerica Bank’s Direct Express MasterCard, which is used to disburse social benefits payments. A financial capability platform, PayPerks teaches cardholders about general financial matters, such as budgeting and saving, as well as specific information on Direct Express, such as tips to minimize fees. PayPerks users learn to make meaningful changes in financial behaviors through educational modules that are brief, straightforward and fun. Users have chances to win monthly cash prizes for taking the curriculum and modeling the described positive behaviors, such as using the card at the POS instead of withdrawing cash at an ATM. By mid-June 2013, some 50,000 cardholders had already taken nearly 300,000 educational modules. —Brett Adams, U.S. Prepaid Product Leader, MasterCard |
 At PayPerks, we’re focused on financial capability more so than financial literacy … that is to say, we are more interested in changing behavior than simply providing cardholder education.
That being said, we do believe that financial education is a key component to behavior change, particularly among prepaid cardholders. The PayPerks approach combines financial education with the power of sweeps-based games to drive behavior changes that are positive for consumers and profitable for the financial institutions that serve them. —Arlyn Davich, Founder and CEO, PayPerks |
| Prepaid cards are an excellent way to promote financial literacy, because they allow people to experience budgeting, using ATMs, making purchases and paying bills in a low-risk environment. Because there’s no line of credit, you can’t overdraw and you can’t spend more than you have.
In listening to our existing prepaid cardholders, we’ve learned that access to financial information and money management tools are critical to helping people feel in charge of their own money. That’s why American Express Serve has added money management tools like direct deposit and person-to-person money transfer. American Express Serve also has a mobile application that enables our customers to view their balance or transfer funds around the clock. —Stefan Happ, Senior Vice President, U.S, Payment Options, American Express |
 Bank of America Merrill Lynch continuously refreshes its cardholder collateral to ensure new cardholders understand financial best practices. We closely coordinate with our call center to understand common questions and concerns, and proactively use this information to update resources that support the launch of new programs. We also leverage the results from cardholder surveys to further enhance the accuracy and practicality of the information we provide.
—Brian Greehan, Director, Card Product Solutions, Government and Commercial Prepaid, Bank of America Merrill Lynch |
| ADP promotes financial literacy with our ALINE Card product through a wide range of tools and resources we provide to both our employer clients and directly to cardholders, including education around proper usage of the card, budgeting tips and other materials focused on becoming financially savvy and avoiding card fees. We produce simple, direct and transparent videos, written materials and Web content that help educate cardholders about avoiding fees, how to use the card for free and how to generally save money so they can become more fiscally responsible.
—Anthony Peculic, Senior Director, Product Strategy & Management, ALINE Payment Solutions, ADP |
| Consumers are smart, and they grasp the benefits of prepaid immediately, but they can only make good financial decisions with full disclosure on the cost of ownership. We believe transparency in all communication channels is key to promote financial literacy—being extremely clear about product fees and features in our retail and online messages.
Customers new to our product will see fees clearly outlined on the package they pick up in the store and will again be presented with the fees when they receive their personalized card in the mail a few days later. We also offer money-saving tips multiple times during our relationship with a cardholder, including how to sign up for free direct deposit and how to track balances with free SMS text alerts. Having a mobile app makes all of this easier because cardholders can see their account information wherever they might be and whenever it’s convenient to do so. —Hal Paul, North America Region Head for Global Stored Value, Western Union |
| Question 2. What approaches and media/distribution channels work best to reach young people, in particular? |
 MasterCard uses social media outlets to reach multiple stakeholders, including youth market segments. This approach is not specific to our prepaid business per se; rather it’s a corporate initiative that touches all of our business units.
Just over a year ago, we launched our Conversation Suite, a social media tool that monitors social media engagements in 43 markets and 26 languages across Facebook, Twitter, YouTube, Weibo, etc. With the tool, we are empowered to make better decisions and create even better products. Prior to the Conversation Suite, MasterCard was included in 30 million online conversations each month. However, we were engaged in less than 1 percent of them. We now have the capability to follow, interact, correct misperceptions and identify influencers. It’s a huge opportunity for us to continue to put human voices behind our brand. —Brett Adams, U.S. Prepaid Product Leader, MasterCard
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.gif "Hal Paul") Not all Millennials think and act alike, of course, but digital channels tend to be the most effective ways to reach younger consumers. Social media channels also can be effective, but just posting to your Twitter or Facebook pages is no guarantee to catch their attention; rather, creating partnerships with adjacent brands can promote your product much more effectively than if you try to go it alone. Partnering with retailers and other selling agents that cater to young consumers will naturally put your product in front of this subset of customers. Authentic communication that is short and sweet and that gets to the point quickly works best when you’re trying to speak to younger consumers. Being able to engage younger consumers through their mobile phones can’t be underscored enough, since they take their phones with them wherever they go.
—Hal Paul, North America Region Head for Global Stored Value, Western Union |
| Young people tend to take a different approach to banking and spending than previous generations. They’re highly mobile, and it’s important to offer services that cater to how they spend and manage their money. They’re less likely to have a traditional bank account and more likely than any other age group to use a financial institution without any physical branch locations. That said, they still want traditional conveniences like online bill pay, rewards programs and the ability to transfer funds, which makes prepaid cards like American Express Serve a great option for them.
With American Express Serve, we are also looking at new partnerships that will allow us to extend American Express’ benefits to a younger tech-savvy market. For example, we recently announced a partnership with the student hub Chegg, which offers students a new way to receive payments for selling textbooks via Serve. American Express Serve also allows its users to instantly send, receive and request money from friends, family or college clubs via email, text, Facebook or the Serve app—making it easy to split a dinner bill, pay sorority dues or request funds from parents. —Stefan Happ, Senior Vice President, U.S, Payment Options, American Express |
| Through our employer client base, we have a large percentage of younger people among our ALINE cardholder customers and have evolved our communications and product plan specifically to address their needs. We have shifted a lot of our focus to digital marketing and with the launch of our mobile app, we’re now leveraging that platform as well as online and Web as our primary communication vehicles. Moving forward, we are also investigating how we can use social media channels in a broader way to provide information and education directly to our cardholders.
—Anthony Peculic, Senior Director, Product Strategy & Management, ALINE Payment Solutions, ADP |
 Regardless of age, the best channel for educating prepaid cardholders is face-to-face. Credit unions and community banks, through which TMG distributes its ATIRA-brand prepaid cards, are in the enviable position of having great relationships with their customers. This certainly makes education easier, as staff can help direct potential cardholders to the best product for their particular needs. This upfront, proactive approach prevents cardholders from getting into a product they may not understand or a fee structure they cannot afford. In addition to the face-to-face financial literacy opportunity, cardholders also have the opportunity to partner with a community-centric financial institution that can provide other necessary products, such as consumer-friendly loans or savings guidance.
—Konrad Christensen, Retail Payments Product Manager, The Members Group
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| Our prepaid programs are distributed through government agencies or commercial entities, and as a result, we focus on providing those clients with the knowledge and resources that will help them build a strong financial literacy program for their employees or customers. In our view, prepaid cardholder materials, including custom card carriers, inserts and wallet cards must address the specific nature of the program. These materials have proven to be a critical resource for cardholders. We regularly update the content of the materials to ensure their accuracy and practicality.
—Brian Greehan, Director, Card Product Solutions, Government and Commercial Prepaid, Bank of America Merrill Lynch |
| Question 3. How do your financial literacy efforts support your overall strategy for growth in prepaid? Why is it important to your business? |
 We believe technology is the key to helping everyday Americans manage and move their money affordably. That’s why we’ve invested in the Serve platform to build products like Bluebird and American Express Serve— low-cost, alternatives to traditional banking, payment and commerce services.
Everyone should have access to the same opportunities to manage their money and adopt good financial habits. This is both a business opportunity and an obligation to better serve the tens of millions of Americans who are currently unhappy with or underserved by traditional financial systems. —Stefan Happ, Senior Vice President, U.S, Payment Options, American Express |
| At Bank of America Merrill Lynch, our focus is on cardholder satisfaction, an important element of which includes financial literacy. Cardholder satisfaction is a metric that we take seriously, and we measure it from a number of angles: We monitor our call centers, we survey our cardholders, we listen closely. Without cardholder satisfaction, the industry will not reach its full potential of providing a reliable, safe payment for any type of disbursement—whether its wages, benefits or incentive. To that end, financial literacy and all the elements that constitute cardholder satisfaction are central to Bank of America Merrill Lynch’s commercial prepaid card business.
—Brian Greehan, Director, Card Product Solutions, Government and Commercial Prepaid, Bank of America Merrill Lynch |
| Again, when we think about financial literacy, we see it as a necessary component to drive financial inclusion—the historical foundation of our prepaid strategy. The exciting thing about prepaid as a product is that it has enabled regulated payments and technology companies, like MasterCard, to economically deliver convenience, security and money management tools to a population that has lived outside the financial mainstream for too long.
This population is often new to financial services. We have found that providing financial educations is both a great way to build trust and an opportunity to demonstrate how prepaid cards are tools to help avoid overspending, track expenses, access online shopping and save money with direct deposit. It also helps save time and energy by avoiding the lines at walk-in bill pay on Saturday morning and spending the time at your son’s soccer game instead. —Brett Adams, U.S. Prepaid Product Leader, MasterCard |
| The application of prepaid in the marketplace is evolving every day, so lacking a strategy to promote new features and usage options through effective financial literacy means you’re not giving consumers a reason to use your product more than they do today. Consumers prove every day to be a tremendous source of new ideas for prepaid, so failing to help new users achieve a base level of knowledge about prepaid products only jeopardizes that cycle of innovation that’s so important to growing your business and the industry in general. Fundamentally, consumers won’t adopt your product if they don’t they have a need, and financial literacy is important in exposing them to that gap that may exist.
—Hal Paul, North America Region Head for Global Stored Value, Western Union
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| Financial literacy is important to potential prepaid cardholders in the same way it’s important for everyone. Visa is dedicated to helping people improve their financial futures by developing a better understanding of a broad range of personal finance topics, including creating a budget, saving for retirement and spending wisely. These tools, resources and tips can help consumers build strong solid money management skills that will serve them today and for years to come.
—Lisa McFarland, Head of Consumer Prepaid Products, Visa Inc. |
 I believe that all efforts with financial literacy play a key role in the growth of prepaid. At ADP, we realize that educating cardholders about the proper usage of our ALINE Card product, effectively budgeting money and using the card in an effective way will lead to greater satisfaction, retention and usage of the card—ultimately helping to promote growth in this segment. While it does require additional work and effort to launch and run these types of educational programs, I personally feel that the return on investment and the overall benefit to cardholders in their daily lives far outweigh the financial impact. Financial literacy is and will continue to be a key focus area for our product, and you’ll see this with numerous new tools and resources that we’ll be launching in the coming months for our cardholders.
—Anthony Peculic, Senior Director, Product Strategy & Management, ALINE Payment Solutions, ADP |
