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Prepaid Cards Seizing Turf in Dollar Stores

Adam Rust's picture

Posted May 25, 2012

In a trend that reflects the preference among consumers to buy prepaid cards in retail settings, both Netspend and Green Dot have signed deals to offer their cards in national dollar store chains in the last month.

Green Dot announced a new contract with Dollar Tree this week. The Green Dot arrangement will give the

company the opportunity to be the only prepaid debit card seller in the stores. I think exclusive contracts are one of the emerging dilemmas in prepaid cards. While it creates a valuable moat for the program manager and their issuer, it undermines consumer choice. While Green Dot does have non-exclusive arrangements, their cards are rarely displayed on any racks with more than three or four options. For the company, though, it remains a great proposition:

"We work with each of our retailer partners to determine the best arrangement related to exclusivity and in some cases, such as Dollar Tree, exclusivity is deemed appropriate. While exclusivity allows us to own the shelf space, our non-exclusive deals also carry a benefit of a bigger, more pronounced in-store presence that can help attract passing customers and potential new cardholders to the category."

Green Dot shares rose 6 percent upon announcement of the new deal.

NetSpend's new contract does not establish an exclusive presence. Perhaps this means that consumers will be better served by more choice in Family Dollar.  A spokesperson for NetSpend made this comment on the arrangement:

Our agreement with Family Dollar is part of our retail expansion plans. We know many self-banked consumers already go to Family Dollar stores, so this gives us an opportunity to provide them with convenient access to our products. Expanding our retail footprint is important because it gives our customers an easier way to take care of their financial services needs outside of the traditional, normal banking hours and at locations that are more convenient to them.

Retail sales make up more than 4 of every 5 prepaid debit card purchases.