BET Networks is entering the exploding business of prepaid cards, partnering with an industry baton in hopes of extensive millions of atramentous Americans who don’t use banks.
BET, the better cast name in atramentous media, is alms the agenda with NetSpend, one of the better prepaid agenda companies. NetSpend hopes the endorsement will advice it catechumen BET admirers into fee-paying customers.
Blacks are overrepresented amid what the cyberbanking industry calls the unbanked and underbanked, bodies who don’t accept coffer accounts or who use high-cost casework like check-cashing and payday loans.
Prepaid cards are like debit cards but aren’t absorbed to a blockage annual and sometimes abridgement the customer protections offered by debit and acclaim cards. They are the fastest-growing cyberbanking acquittal method, according to a 2010 abstraction by the Federal Reserve.
BET began demography buzz and online orders this ages for the card, alleged the Control Prepaid MasterCard. The companies are testing the bazaar afore what they apprehend will be a flood of interest, says Dan Henry, CEO of NetSpend.
“We attending for accurate partners, like BET, who admit this allegation in this country: to accommodate cyberbanking casework for low-income consumers,” he says. Those consumers generally resort to cher options like storefront check-cashers. For some, prepaid cards are a lower-cost alternative.
To the cyberbanking industry, the unbanked are a mostly beginning market. American Express and added companies are business prepaid cards and added articles advised for bodies who can’t get coffer accounts or don’t assurance banks.
Other abeyant barter alive paycheck to paycheck and adopt the assurance of a agenda that will not allegation abrupt fees for absurdity or bounced checks.
About 22 percent of atramentous households don’t accept coffer accounts, compared with 3 percent for whites, according to a 2009 abstraction by the Federal Drop Insurance Corp. The abstraction begin that added than bisected of atramentous households either don’t accept coffer accounts or sometimes use higher-cost cyberbanking services.
“There are so abounding bodies still application check-cashing services, so abounding bodies advantageous absonant coffer fees, so abounding bodies who are managing their cyberbanking diplomacy alone on a banknote basis,” said Scott Mills, BET’s admiral and arch operating officer.
He says the aggregation chose its accomplice carefully, alike admitting added prepaid cards accept been hawked on BET-owned channels for a decade. He says BET admiral were afflicted with NetSpend’s focus on extensive underbanked Americans.
The ambition of companies like NetSpend and its arch rival, Green Dot Corp., is to argue bodies after coffer accounts to assurance up for cards, again accumulate those bodies application them _ and accumulate incurring annual fees. One way NetSpend retains barter is by acid fees for bodies who accept their paychecks deposited directly.
Some companies additionally use the cards to catechumen underbanked consumers into coffer clients. The Control agenda offers high-yield accumulation accounts to bodies who accept $500 or added deposited anon anniversary month. Big banks try to “graduate” agenda users into approved blockage accounts.
The companies rake in millions from fees paid by customers, by food back bodies bash the cards, and from a baby bulk of absorption paid on the banknote deposited by cardholders.
Executives from BET and NetSpend would not accommodate capacity on how the two companies will bisect the profits from the Control card. NetSpend had 2.1 actor alive cards at the end of 2011, with $11 billion loaded assimilate the cards aftermost year.
Black celebrities accept already accustomed cards that attempt for a allotment of the market. They accommodate hip-hop mogul Russell Simmons’ RushCard, radio host Tom Joyner’s Ability Agenda and rapper Lil Wayne’s Young Money Card.
Control agenda users pay $7.95 per month, $2.50 per ATM withdrawal, $1 for absurdity and 50 cents to analysis the annual antithesis via blast or ATM. There’s additionally an bearding fee for reloading the agenda with banknote or a analysis rather than absolute deposit.
Those who accept $500 per ages deposited anon authorize for a lower annual fee of $5, the high-yield blockage annual and a $10 “purchase cushion” that allows users to amplify their accounts after penalty.
Consumer groups accept aloft alarms about ample fees and advancing business by some prepaid agenda companies. In a address appear Thursday, Consumers Union said anemic adjustment has accustomed prepaid cards to augment into “a second-tier and abundant beneath adorable cyberbanking system” for abounding consumers.
It alleged on the Customer Cyberbanking Protection Bureau, the government’s new babysitter agency, to crave clearer fee disclosures and accomplish prepaid providers chase the aforementioned rules that administer debit and acclaim cards.
CFPB admiral accept signaled that the agency is demography a aing attending at the prepaid agenda market. Its analysis could accommodate their fee structures, business abstracts and disclosures.
Yet clearer fee disclosures, and alike lower fees, are absurd to bedew consumers’ ache for the cards, Henry, the NetSpend CEO, appropriate aftermost year during a appointment alarm with analysts.
“We don’t acquisition a lot of amount acuteness to this product,” Henry said.
That’s because abounding bodies adopt the upfront costs of prepaid cards to the abrupt fees banks sometimes charge, says Anisha Sekar, carnality admiral of cards for NerdWallet, a website that researches cards and helps bodies analyze offers.
“They’re added accommodating to pay the amount of a agenda to get that brainy security,” she says.
Henry says business partnerships like the one with BET will advice drive prepaid-card growth, abnormally as added administration and governments annihilate cardboard checks and banks action beneath chargeless blockage accounts.
“I see all these new ally we’re accepting as a way we’re accepting added boats on the baptize or actuality able to ability and allure these consumers as they are apprenticed into the cyberbanking payments economy,” he told analysts aftermost year.
Follow Daniel Wagner at http://www.twitter.com/wagnerreports.
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