The Importance of Budgeting
Consumers feel same way about budgeting as they do about dieting: something they know they should do but never seem to really get around to or stick with. But i2c's new research on the topic suggests that prepaid products and related technologies might actually help give consumers the motivation and the tool set to make it stick. Issuers can then use these prepaid products to promote budget awareness and establish positive, more valuable customer relationships.
Of course, there’s no shortage of budgeting tools or personal financial management programs to help consumers. The majority provides post-spending analysis in an attempt to help consumers figure out where their budget went awry. But there’s new evidence that prepaid can help consumers before they veer off track. It harkens back to one of the oldest budgeting tools and tricks of all – the envelope system. This tangible method of earmarking money for bills, savings or other expenses can now actually be brought to life using prepaid products.
The Role of Prepaid and the New Tools that Lead to Budgeting Success
Technology that allows for the creation of separate “purses” on prepaid cards makes it possible for a consumer to set a budget and activate controls around these amounts. These features, along with real-time account alerts, allow for an easier adoption of budgeting and increase the effectiveness of prepaid cards, according to the report.
Setting up these limits makes consumers more aware of how they spend their money, and helps to strengthen their self-control. And with the purse limits in place, purchases that fall outside of the budget can be prevented. According to the report, some prepaid cards also have the ability for the cardholder to designate a “financial buddy” if they need extra resolve in sticking with their pre-set spending controls.
This is welcome news for issuers who are looking for new features to make prepaid products more attractive to their customers. The cards impose welcome constraints – making overspending impossible since credit is not an option. They are also accessible, easy to activate and use, and widely accepted.
Steps to Help Consumers Thrive Financially
Financial institutions and businesses also greatly benefit from offering prepaid cards to customers and making budgeting easier to adopt and more effective. These businesses can create budgeting programs that generate positive interactions and enhance customer engagement, and by tending to their customers’ needs in difficult times, customers will remember and continue to come back for more. Prepaid products and the budget awareness programs built around them, according to the report, have the power to boost overall loyalty and establish solid, “more profitable” relationships.
To learn more about how prepaid cards are emerging as the newest form of personal financial management, and how issuers can use them to attract new customers, download the white paper here.