from the Philadelphia Fed
— this post authored by Susan Herbst-Murphy and Greg Weed
“Millennials with Money: A New Look at Who Uses GPR Prepaid Cards”, a paper based on findings and insights from the prepaid card section of the 2013 Phoenix Marketing International (Phoenix) Consumer Payments Monitor, was published in September 2014. Among the research findings included in the paper was the discovery of a “power user” group of young, banked, middle- to upper-income general purpose reloadable (GPR) prepaid cardholders who were challenging certain preconceptions of GPR prepaid cards as a product for low-income and unbanked consumers.
The paper generated considerable interest among those who are following developments in prepaid cards as well as those with a focus on the generational tidal wave that is the Millennials. In response to that interest, we provide this update based on information captured when the Consumer Payments Monitor was again fielded in the fall of 2014.
The Consumer Payments Monitor is an online survey completed annually by more than 4,000 individuals selected to be representative of U.S. households with regard to head-of-household age and income and to geography. A section of questions pertaining to GPR cards was added to the survey in 2012. As reported in the earlier paper, there was notable growth in adoption of GPR cards between 2012 and 2013, particularly among younger consumers (Millennials and Generation X) and those in the middle- to upper-income categories. This update will review how the growth patterns look in the third year that GPR card ownership information was collected.
The data from the 2013 survey turned a spotlight on younger consumers, contributing to an incidental finding indirectly related to GPR card ownership: There exists a “hybrid” financial services consumer who combines traditional bank products with alternative financial services (AFS) from nonbank purveyors. As with prepaid cards, stereotypes have developed around AFS that associate their use with individuals with lower incomes and who are underbanked, a categorization not entirely consistent with what was revealed by the 2013 Consumer Payments Monitor. In this paper, we use the 2014 survey findings, as well as an extensive review of secondary research, to further explore this insight.
Comparison of 2013 and 2014 Findings
GPR card ownership remained at 25 percent of U.S. households in 2014.2 While overall ownership rates did not rise as they had between 2012 and 2013, when ownership increased by 4 percentage points, a surge was observed in the younger, high-income segment ― “Millennials with money” ― identified in our previous paper. Figure 13 at the end of this document illustrates that 60 percent of Millennials with money (consumers ages 18 to 32 with household incomes of $100,000 or more) reported having a GPR card in 2014, up dramatically from the 2013 rate of 49 percent. Two other segments – Generation X with household incomes of $50,000 to $99,900 and those ages 68 and older – were the only other groups to own GPR cards in 2014 at proportionately higher rates than in 2013.
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