Fed governor puts prepaid in perspective

The annual conference at the Federal Reserve Bank of Philadelphia Payment Cards Center was marked by an address delivered by Elizabeth A. Duke, Governor of the Federal Reserve, that highlighted prepaid cards as an increasingly preferred payment option given current economic conditions and new federal mandates.

Duke stated that the U.S. economic troubles which surfaced in 2008 caused consumers to turn away from credit cards "not only as a source of credit but also as a method of payment." The variety of alternative payment methods includes prepaid cards and mobile phones, according to Duke.

Additionally, Duke addressed the effects of federal legislation on the shifting payment landscape. Passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires the Fed to develop standards for debit card interchange fees and the routing of debit card transactions, has caused banks to reconsider offering free or low-cost checking accounts if they experience lost revenue due to new overdraft and interchange fee restrictions, she said.

"As the pricing of checking accounts changes, financial institutions and consumers may turn to certain types of reloadable prepaid cards as checking account alternatives," Duke noted.

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