In a sector where the pace of change is moving quickly, both in the makeup of the products that it offers and with the regulatory system that governs it, it goes without saying that things will look different one year from now. The question is not "if," but how.
Five questions that could be answered in 2013:
Will customers take up online billpay and remote deposit? These are two of the most powerful functions available to prepaid card consumers but up to now, consumers have been slow to take advantage of those features on their cards.
Will more big banks come forward with their own general-purpose reloadable debit card, and if they do, how will it disrupt the current marketplace? Big banks can earn exemption from the Durbin Amendment if they produce cards to a pre-determined set of criteria. They have to offer cards that do less - even if customers want them to do more. Perhaps because of the lure of an exemption, banks have come forward with cards whose value proposition exchanges cost certainty and cost savings to card users at the exclusion of ACH, billpay, and overdraft. Banks are using their competitive strength - their branches - to make their GPR cards more attractive. It seems to be working. If more banks decide to move into prepaid, it could have the effect of taking market share from some of the current industry leaders. Still, its important to remember that prepaid is not a zero-sum game. With so much growth, the big banks will probably find new customers as well.
What will the CFPB say about overdraft and credit on prepaid? I do not think that anyone has a read on how the CFPB will craft its rule-making on GPR. When they do, however, these will be some of their most closely-watched decisions.
What of the two-issuer and the issuer-non-bank model? While TandemMoney has been shelved, there is still no public guidance about the emerging practice of conducting payments and savings through one bank and then overdraft or a line of credit via another entity.
Is it time for a new savings account? One banker told me that he doubted that a savings account would not attract consumers even if it offered a thirty percent rate of interest. I doubt that we will ever have empirical evidence to answer that question, but the sad truth is that only a few consumers have ever used a savings sub-account to build a substantial nest egg. Until that becomes more common, part of the promise of prepaid will be unmet. I think that many people believe that prepaid can be a bounce-back platform. While there are certainly other paths - big bank cards that give access to branches are one - savings is a gatekeeper. Ultimately, I think interest is the wrong solution. I am optimistic that prepaid could develop its own iteration of the Way To Save account, although I think it would need to come with more liquidity. Most likely, I suspect that the solution will tap some of the energy that is possible through a behavior model.