General-use prepaid cards: the path to gaining mainstream acceptance
AbstractFollowing the rapid proliferation of merchant-issued prepaid gift cards, some people assumed that the added functionality available in network-branded prepaid cards would lead to similar early success for these payment vehicles. While a number of emerging applications are gaining traction, others are struggling to reach viable scale. This paper argues that the rich functionality creates a significant “cost hurdle” that must be overcome with economically viable solutions. The paper identifies two emerging strategies that hold particular promise: 1) developing applications that efficiently displace high-cost legacy structures, and 2) creating financial services solutions for consumers outside the traditional banking framework. Both strategies rely on defining large markets to target and creating longer term relationships with cardholders.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Philadelphia in its series Payment Cards Center Discussion Paper with number 07-03.
Date of creation: 2007
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-14 (All new papers)
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- Michele Braun & James McAndrews & William Roberds & Richard Sullivan, 2008. "Understanding risk management in emerging retail payments," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 137-159.
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