NEW YORK (BankingMyWay) -- If banks aren’t viewing PayPal as a direct threat to their business model, they may be making a mistake.
Consider the latest announcement from the online payment provider that its signature prepaid debit card will be available at 7-11 locations across the country.
Prepaid cards are a booming market. A recent study from the Pew Health Group shows that the prepaid card market will grow from $28.6 billion in 2009 to $201.9 billion by 2013.
PayPal’s deal with 7-11 aims to take a bigger slice out of that market, and out of bank profits.
“Today I’m excited to tell you that we’re rolling out our very popular PayPal Prepaid MasterCard to participating 7-Eleven franchises and company-operated stores nationwide,” Don Kingsborough, vice president of retail and prepaid at PayPal said in a blog post.
“The PayPal prepaid card is a great way for our 110 million customers to access their PayPal accounts offline and unlock more benefits – like online rewards, an optional savings account, real-time account alerts via text message and online budgeting tools," the PayPal executive said in the blog post. The PayPal Prepaid MasterCard card can be used for online and in-store purchases wherever Debit MasterCard is accepted. To be activated, the card has to be linked to a PayPal account, the company says.
Offline, the card can be used to withdraw cash from ATMs while money can be loaded onto the card through direct deposit from a PayPal account or at more than 130,000 reload locations throughout the U.S. including Safeway (Stock Quote: SWY) and Walgreens (Stock Quote: WAG).
There’s no study available that compares foot traffic between convenience stores and banks, but it’s likely that consumers will head out to a 7-11 in the near future, and that’s what PayPal is chasing as it continues a retail expansion of its services: the regular consumer who stops off at a convenience store for a cup of coffee on the way to work, and who might pick up a prepaid card on the way to the register.
7-11 sees opportunity, too.
"We are expanding our current offering of alternative financial services because we see an increased demand for this type of product in our stores," said Jesus Delgado-Jenkins, 7-Eleven's executive vice president for merchandising, marketing and logistics, in a statement. "Our customers are seeking choice and convenience when it comes to buying a prepaid card. We are selling the PayPal prepaid card because the brand already resonates with many consumers who want more financial flexibility and alternatives to traditional retail banking."
PayPal says that the card will be available in all of 7-11’s 5,500 stores, a move that should be a hit with consumers who, in addition to coffee, a Big Gulp, a gallon of milk and a bag of ice, will now be able to pick up a PayPal prepaid card.
Offering prepaid cards through convenience stores is a sign of the times. Banks better figure out a way to fight back, or risk losing more customers.
—For more ways to save, spend, invest and borrow, visit MainStreet.com.