Stored Value Cards: A Scan of Current Trends and Future Opportunities

This report highlights the opportunities of transferring stored value card (SVC), a prepaid debit card that imitates a checking account, as an alternative to traditional bank accounts for saving and building assets. The analysis gives a brief overview of SVCs:

• Prepaid, limiting the risk of overdraft and providing nearly immediate liquidity;
• Powerful tool for financial transactions with great ease;
• Can be used by unbanked and under banked consumers to manage their money:
• Can be grouped into three categories - payroll-only cards, reloadable payroll cards, reload able debit cards.

Some of issues and challenges that need to be addressed for further development of SVCs:

• Given the various functions involved in offering SVCs, sorting out roles and responsibilities can be complicated;
• As a new product with few comparables, SVCs raise several complex legal and regulatory concerns;
• The asset building component needs to be included.

The report discusses ways in which SVCs could be used to help consumers build assets and describes specific product offerings that have taken a first step in that direction:

• Several companies are beginning to tie their SVC products to remittance products;
• Three products that offer consumers the ability to build a credit history are Indigo Card, Eufora Credit Builder, NetSpend All Access MasterCard;
• They provide extensions of small amounts of credit to consumers and also a payday advance or overdraft protection feature;
• Many SVCs offer some sort of bill pay option.

The paper concludes that the combination of the convenient model of SVCs and the long-term process of building assets provides an exciting opportunity for innovation and partnership; however additional work is necessary to move the SVC market forward.