Prepaid cards are evolving into more feature-reach transaction accounts and regulators are carefully following these trends. Can a prepaid card replace a checking account? For some consumers, the answer is yes, but can all issuers play in this market? So far, the answer has been no and regulators may help (or hurt) this emerging market if they don’t get their controls just right.
“Due to their rising use among Americans, debit cards are drawing the scrutiny of consumer groups who have called for more oversight of issuers.
The new Consumer Financial Protection Bureau is planned to step up to that role when it opens in July.
“People are using prepaid cards as checking accounts and the government ought to regulate it similarly,” says Suzanne Martindale, who is a lawyer for Consumers Union.”
If regulators are successful, they can help the market by creating an environment where these cards are equitably priced and consumer funds are protected. As more mainstream financial institutions enter this market, that dynamic should also help drive product normalization.