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Chase Enters Prepaid with Liquid

Adam Rust's picture

Posted May 8, 2012

JP Morgan Chase says that it will offer a new prepaid debit card. Chase says that the Liquid card will be piloted in 200 branches. I will be waiting and watching to see how much business this card will take from the entrenched national players like NetSpend and Green Dot. Certainly, it is an attractive card. It is very likely

that the Liquid card will end up costing most people less money to handle their payments. The challenge for Chase will be in how they can market Liquid. The popular ways to sell cards right now are through relationships with national retail chains or through the use of celebrity endorsements. Green Dot has important turf secured at Wal-Mart and in some of the national pharmacies. NetSpend is in a lot of payday loan stores and check cashing outlets. Chase will have a different route - they are going to sell this card through their branches. I think their success or failure in marketing a good card through bank branches will be important in determining if more big banks get into prepaid. Banks can diverge in how well they execute on this plan. At BB&T, there is no signage about their prepaid card inside the branch. The tellers do have brochures, but a person has to ask for one. Naturally, anyone can complement that with some kind of targeted online advertising spend. I suspect that Chase will do both. 

In general, I'm optimistic about this card and about the idea of big banks issuing prepaid debit cards. Liquid has a simple price structure. It costs just $4.95 per month to use the card. There are out-of-network ATM fees, but consumers will be able to use the card at Chase ATMs for free. The difference maker is going to be how well Chase does in educating its customers to use its free ATMs. The Federal Reserve says that seventy percent of the fees paid by prepaid debit cardholders stem from the use of ATMs. The big banks are uniquely qualified to lower those costs because they have large ATM networks and visible signage. It might be hard to know if a gas station has an ATM and even harder to know for sure if it is the one that comes surcharge-free for users or a particular card. That is never going to be the case with using a prepaid card issued by a large bank.

I would like to see a remote depost service attached to the card.

It is the Durbin Amendment

This limited functionality is the doing of the Durbin Amendment. Small issuers offer online bill pay and linked savings accounts. Because of Durbin, big bank prepaid cards do not have the same abilities. Its too bad that the big banks are not incented to do the same. It is a shortcoming that is not just a problem for current prepaid card holders. It is also a missed opportunity. If more prepaid card holders were using cards issued by big banks, it is more likely that at least some of them would be able to use their payments history to qualify for other bank products. For the most part, iso-issuer (banks and thrifts where most of their business is prepaid) banks do not have a wide range of products. Today, most of the big banks have developed wide platforms.