(New York, NY): Older millennials are increasingly eschewing cold hard currency for budget-friendly alternatives, considered to be even more secure than credit, debit, and store cards. This older millennial population, and other desirable demographic groups, are increasingly turning to P2P payments and reloadable prepaid cards when transferring funds. In fact, over one-third of cardholders have used P2P payments (42%) or a reloadable prepaid card (36%), according to a new study from Auriemma Group, which was conducted in partnership with the Network Branded Prepaid Card Association (NBPCA). The study highlighted use cases for P2P payments and prepaid among the banked population, shedding new light on who uses them and why they are an attractive payment alternative.
The results point to an opportunity for prepaid card issuers to integrate their offerings with P2P to better capture market share. The commonalities between these user groups make a compelling case. Most current P2P payment users and prepaid cardholders are male (57% and 53%, respectively), college-educated (62% and 53%), parents of minors (56% and 50%), and report a household income over $50,000 (67% vs. 55%). While these attributes register most strongly with the P2P payment users, their similarities highlight the connection between both groups.
“Our previous research tells us that those who use P2P payments are about twice as likely to currently hold a prepaid card than their non-using counterparts,” said Jaclyn Holmes, Director of ACG’s Payment Insights. “This cross-section of users could create increased engagement with prepaid cards should they be accepted by P2P payments.”
Users of both prepaid cards and P2P payments are more than just demographically similar. When looking at the perceived benefits of both methods, users of each report comparable advantages, namely security, budgeting, and convenience.
Reloadable prepaid cards are a particularly attractive payment alternative for consumers for whom security and budgeting are top of mind. Despite having a banking account, those who have used prepaid cards believe the most beneficial aspects are that they don’t link to a bank account (44%), offer a secure payment method (33%), and help with budgeting (33%). Prepaid cardholders aren’t the only ones who think the method is secure—most consumers believe prepaid cards are more secure than credit (59%), debit (60%), and store cards (58%). And unlike cash, prepaid cards bring these benefits to the digital shopping experience.
“The payment method allows cardholders to purchase online worry-free, as doing so will not compromise their checking account,” said Holmes. “And prepaid cardholders can set limits for category or everyday spend, allowing them to more easily maintain a budget.”
The perception of security is also high with P2P payments. Although users have a more positive impression of the method’s security than non-users, both believe the method is secure (88% and 65%). And this isn’t the method’s only similarity to prepaid cards.
“A small group of consumers utilizes P2P as a budgeting tool,” Holmes said. “About half of those who leave money in their P2P account do so because it helps them save money.”
Convenience and speed also earn top marks with P2P, with about nine in ten users reporting P2P payments make it easier to pay people far away (92%), that payments clear faster than checks (90%), and that splitting checks or bills is easier (87%).
“It’s safe to say we aren’t moving towards a cashless society, but we are certainly using less cash than before,” Holmes said. “By themselves, P2P payments and prepaid cards provide more flexibility, convenience, and a greater sense of security.”
The collaboration with the NBPCA marks the first time ACG has partnered with an industry association to conduct custom consumer research and signals ACG’s ongoing commitment to work with industry associations to illuminate solutions in an evolving environment.
“The findings of this study affirm what we in the industry have long known, that consumers turn to prepaid for the security and convenience the products provide,” said Brian Tate, president and CEO of the NBPCA. “From budgeting to safety to digital access to funds, it is clear that prepaid products are meeting the needs of our consumers, and prepaid providers will continue to build on the long tradition of evolving our products to continue to do so in the future.”
While this study focused on the banked population, a potential future study may focus on the unbanked population.
This study was conducted online within the US by an independent field service provider on behalf of Auriemma Consulting Group in March 2017, among 800 debit cardholders. The purpose of this research was not disclosed nor the criteria for qualifying. The average interview length was 20 minutes.
About Auriemma Group
Auriemma is a boutique management consulting firm with specialized focus on the Payments and Lending space. We deliver actionable solutions and insights that add value to our clients’ business activities across a broad set of industry topics and disciplines. For more information, contact Jaclyn Holmes at (212) 323-7000.