Will prepaid card users be willing to give up the privacy that using a prepaid card gives them, in exchange for a rewards program?
That`s the question that Western Union is gambling on, as they prepare to offer prepaid card holders a rewards incentive program by the end of the year. Just last week they announced their plan to use cardholder transaction information to create a program offering discounts and rewards to card holders. There`s no word yet how big the discounts might be or what sort of rewards might be offered, but presumably any rewards program they create will have to be enticing enough that customers are willing to trade their privacy to participate.
Award-Winning Cards Move Millions
Western Union`s prepaid cards have some of the lowest fees around and even recently won an award as best-in-class at a prepaid card trade show. The president and chief marketing officer of Western Union Ventures, Diane Scott, talked in a recent interview about the discount program, saying that she hoped it would encourage more Western Union customers to use prepaid cards instead of cash. She said that in the last year, Western Union “moved $81 billion to different parts of the globe, and most of that ends up cash. The opportunity to convert a lot of that cash into stored value is our sweet spot.”
However, the advantage of cash over prepaid cards is privacy – and many customers use it for just that reason.
A Short History of Prepaid Privacy
Privacy is already a hot topic when it comes to plastic – whether credit cards, debit cards, or prepaid cards. Anyone who has read a true-crime book or watched a television crime drama probably knows that if you`re trying to run away without a trace, using a credit card is a mistake. For the most part, paying for things with plastic makes you traceable, as credit card companies know who you are and where you are using your card.
It used to be that people could use prepaid cards without giving up any information about themselves. They were a completely anonymous way to make purchases; as untraceable as cash. That changed after the passage of the Patriot Act in October 2011, following the 9/11 terrorist attacks.
The Patriot Act required vendors of prepaid cards to verify the identity of anyone to whom they issued a card, keep that identification information on file, and check it against a list of known or suspected terrorists. Nowadays it`s standard for any financial institution to gather names, addresses, dates of birth, and even Social Security numbers from anyone applying for a card, prepaid or otherwise.
Gift Card or Prepaid Card?
The exception to this is gift cards – and that`s one of the key differences between gift cards and prepaid cards. The two are similar in that they are loaded with money at the front end of a transaction; they aren`t credit cards which let you spend money that you`ll pay back later. Gift cards, unlike prepaid cards, are usually not reloadable, and in order to buy one, you don`t have to provide any identifying information.
Some gift cards are reloadable, but in order to reload them, the cardholder will have to provide personal information. Also, if the holder of a gift card wants to use it to make purchases online, they will have to register the card – a process that means giving up a zip code at the very least, and sometimes also a name, birth date, home address; possibly even a Social Security number.
Identifying vs. Tracking
So if prepaid cards have always asked customers for identifying information – or since 2001 anyway – then what`s different about what Western Union is proposing to do? The answer is, just because a company may have known who you were before, didn`t mean they were tracking your purchases. Just like stores offer loyalty cards that track your purchases in exchange for discounts, prepaid cards are looking at ways to offer rewards in exchange for information about how you shop. In the case of a prepaid card, they will have access not only to shopping habits at one merchant, but complete access to the spending habits of a prepaid card customer.
Worth it or Not Worth it?
Since this program is yet to be unveiled, and other companies like PayPal, eBay, and American Express are preparing to follow in Western Union`s footsteps by offering their own rewards programs, there is much we don`t yet know about how customers will respond to this type of program – whether it will attract them or drive them away.
Many prepaid cards saddle customers with heavy fees – some charge monthly fees of up to $9.95, as well as fees for reloading the cards, withdrawing cash from ATMs, making calls to customer service, and even making balance inquiries. Any discounts or rewards would have to more than compensate for fees incurred for simply using a prepaid card.