People in prepaid often extol the virtue of innovation, but sometimes we forget that these new ideas are only an enhancement to the product if they help consumers.
Chase just announced one of those "innovations" this week. It is going to put an "instant issue" machine in its branches which can create a personalized card in seconds. Think about that for a second, because it is pretty big. With this technology, Chase can put a fully functional prepaid card in the hands
of a consumer in the same time that a consumer can get a card at a CVS or a Dollar General. That is fairly impressive for a company that certainly doesn't count prepaid as one of its primary products. But that is only half of it, because even though a NetSpend or Green Dot cardholder can walk out of a store with a card in minutes, it will be some time before he or she has a branded card with their name stamped on it. That same hurdle does not exist for a Liquid card.
Chase's advantage could be short-lived if competitors decide to follow suit. The technology is not owned by Chase, but instead by the DataCard Group. Thus it might be that we will see more of this at the larger participants. That's not for sure, though. A DataCard CR500 takes up a fair amount of space. The unit is about 29" by 15" by 13." That is not much in a branch but it would be a significant expenditure of retail space in most chain drug stores. Prepaid card companies already have to pay for the space that their j-hook racks take up.
Nevertheless, the attraction of the product is fairly easy to see. If you have opened up any kind of transaction account recently, you will know that you generally have to wait about a week for a card to come in the mail. Generally that letter is delivered in tandem with a separate notification that indicates your PIN number. Together, its possible that it could take up to ten days to get a working card.
It works both for the traditional debit card offered with a standard checking account but also with the Chase' Liquid cards.
This means that there is now one more reason for a GPR consumer to visit a Chase branch. I think having access to a branch bank makes a big difference in the overall functionality of a prepaid account. I am not alone. It has been something that many people have pointed to as a shortcoming of prepaid across the board. While many large banks do have their own prepaid cards, fewer are open to giving their GPR customers the right to go into a branch for free.
Going to a branch is part of developing a relationship. Whereas a prepaid card user might have previously picked up of one of many different prepaid card brands off of a j-hook, being in a branch can lead to the "next steps" in building a financial life.
I like innovation, but I am skeptical of how it has been used as a spin device to lend support for the idea of putting small-dollar credit on to prepaid cards. I think that there is a degree to which management can become blind to other possibilities when it expends so much effort on campaigning for the credit product. Green Dot has no credit but it will soon have Loopt. Chase has no credit (it cannot even have overdraft given the rules of Durbin) but it has remote deposit and now the Instant Issue. Tandem Money added credit to a card with many great savings innovations, but all of that went to waste because of the regulatory problems that the credit side attracted. TM closed shop.
There are plenty of other innovations yet to be seen. Why no social prepaid card? Why is there not one national program manager offering a prepaid card with rewards? Why haven't more PMs added remote deposit to their platforms?