Challenges of the Prepaid Card Industry - Member Access Processing


Top challenges in the prepaid industry


Prepaid cards are an excellent budgeting tool that more people are taking advantage of every year. They can be used to build credit and manage funds, and can provide an account for unbanked employees to receive direct deposits.


Like any other product, there are some difficulties that consumers may encounter when using prepaid cards. Credit unions that offer their members these cards would do well to listen to feedback provided by prepaid users to improve their products. Only through actively seeking out common issues can improve member experience.


The Consumer Financial Protection Bureau pointed out that, many times, a prepaid card is the only bank account a person uses. As such, it’s crucial that these users are able to access their funds without difficulty.

“For many unbanked and underbanked consumers, prepaid products are a vital source of financial security,” Richard Cordray, the director of the CFPB, said. “We want to make sure consumers using prepaid products can easily access their funds and companies are working to resolve consumers’ issues.”


Credit unions that have not yet reached out to members for feedback about their experiences using their prepaid cards may want to consider issuing a survey to gather comments and complaints. In the meantime, though, some consumer research can help bring them up to speed.


According to the CFPB, some of the most common challenges consumers have with their prepaid card include:


Challenges in registering prepaid cards


Consumers need to register their prepaid cards before they can be used, but the registration process can be challenging. According to the CFPB, many consumers said they had been told their cards were improperly registered and needed certain documentation to correct the problem. However, the information they needed to provide was challenging to obtain, including the original packaging of the card and any receipts associated with the card—items that most consumers throw away.


This is a frustrating situation for many consumers, yet one that can be avoided. One thing that credit unions that issue prepaid cards can do is walk users through the registration process. Detailed instructions online can also help consumers who get their cards in the mail and want to register at home.


Unauthorized transactions on prepaid cards


One of the scariest moments a person might encounter as a credit cardholder, prepaid or not, is noticing a transaction he or she doesn’t remember making. When this is spotted, the cardholder should report it to the issuer immediately. However, many prepaid consumers reported difficulty in resolving the issue. On top of dealing with the unauthorized purchase, some consumers found their cards unexpectedly cancelled shortly after calling about the issue.


Someone who uses a prepaid card on a regular basis may rely on it to receive paychecks, pay bills and make everyday purchases. Finding out the card has been cancelled can be a major financial setback.


Fortunately, the CFPB recently passed new regulations surrounding prepaid cards, including a limit to the losses prepaid card users can incur in the event a card is lost or stolen. But credit unions also have the ability to go beyond these protections to help members who see an unauthorized transaction on their cards.

Training customer care representatives on how to address these issues is a good start. Having clear instructions available online about how to dispute the charges is another good idea.


Difficulties resolving problems


When one of your members has a problem, it’s important that you are able to address it as soon as possible. One of the most widely experienced problems with prepaid cards is the challenges consumers experience when trying to resolve an issue. Investigations can last days or weeks, during which time accessing funds is difficult or impossible. Additionally, when funds need to be replaced after an unauthorized purchase was successfully disputed, many consumers complained of long delays in getting credit on their cards.


Financial institutions need to ensure that prepaid consumers have access to their funds. Sometimes, it’s the closest thing to a bank account that a consumer has, and a frozen account or missing funds can be detrimental.


The prepaid card has become a much-loved financial product that has given unbanked and underbanked consumers the means to make purchases and receive funds in a convenient manner. Thus, it is important that credit unions and other issuers continue to improve these products so that everyone can continue to benefit from them.