Business
BET partners with NetSpend to market prepaid payment card
About 22 percent of African American households don’t have bank accounts, compared with 3 percent for whites, according to a 2009 study by the Federal Deposit Insurance Corporation (FDIC). The study found that more than half of African American households either don’t have bank accounts or sometimes use higher-cost financial services.
“There are so many people still using check-cashing services, so many people paying exorbitant bank fees, so many people who are managing their financial affairs solely on a cash basis,” said Scott Mills, BET’s president and chief operating officer.
He says the company chose its partner carefully, even though other prepaid cards have been hawked on BET-owned channels for a decade. He says BET executives were impressed with NetSpend’s focus on reaching underbanked Americans.
The goal of companies like NetSpend and its chief rival, Green Dot Corporation, is to convince people without bank accounts to sign up for cards, then keep those people using them, and keep incurring monthly fees. One way NetSpend retains customers is by cutting fees for people who have their paychecks deposited directly.
Some companies also use the cards to convert underbanked consumers into bank clients. The Control card offers high-yield savings accounts to people who have US$500 or more deposited directly each month. Big banks try to “graduate” card users into regular checking accounts.
The companies rake in millions from fees paid by customers, by stores when people swipe the cards, and from a small amount of interest paid on the cash deposited by cardholders.
Executives from BET and NetSpend would not provide details on how the two companies will divide the profits from the Control card. NetSpend had 2.1 million active cards at the end of 2011, with US$11 billion loaded onto the cards last year.
Black celebrities have already endorsed cards that compete for a slice of the market. They include hip-hop mogul Russell Simmons’ RushCard, radio host Tom Joyner’s Reach Card and rapper Lil Wayne’s Young Money Card.
