Open-loop prepaid cards are becoming a mainstream payment instrument in the United States. In addition, businesses and governments increasingly view them as a less expensive alternative to checks for disbursing payroll and benefits.There are few studies that examine how consumers actually use prepaid cards, the revenues generated, and the resulting costs cardholders incur. This information gap poses a challenge for an industry in the early stages of refining its business models. It also poses a challenge for policymakers seeking to design cost-effective consumer protections for these products.We analyze an anonymized data set of more than 280 million transactions made on more than 3 million cards issued by Meta Payment Systems. While the data have limitations and are not necessarily representative of the entire market, they can be used to establish a number of important stylized facts about the life cycle of prepaid cards.We report detailed statistics on the longevity of prepaid cards and the intensity of their use, including the frequency and value of spending, the composition of spending at merchants, ATM withdrawals, and reloading of value onto cards. We identify cards that are likely enrolled in direct deposit and contrast usage of those cards with other cards in the data. We calculate statistics on revenues earned via consumer fees and the composition of those fees. We also estimate interchange revenues earned and thus quantify the significance of this funding source to the prepaid business model.

Many factors influence credit-card-issuing banks' decisions about how to fund credit card loans. These factors include the size and structure of the institution, economic conditions, and the regulatory environment. Against the backdrop of a much smaller market for credit card asset-backed securitization, the Payment Cards Center (PCC) wanted to better understand how changes in any of the above factors and in the funding sources accessible to credit-card-issuing banks are affecting funding strategies now and in the future. To gain this perspective, the PCC interviewed a diverse set of credit-card-issuing bank executives. These participants were asked about the composition of their funding sources, changes in the markets for these sources of funds, and the effects of existing or potential regulation. This paper presents several themes that emerged from these discussions.