Of Special Interest


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11th May 2012

JPM prepaid card bank account a trend-setter

JPMorgan Chase has launched a pilot of a new type of account to replace the standard checking (current) account for certain customers and appeal to some of the currently unbanked. The account is called Chase Liquid and has at its core a reloadable pre-paid card. There is a $4.95 monthly charge and no overdraft. Most transactions, including loading of the card by cash, bank transfer or cheque, are free of charge if conducted via Chase. The prepaid card is a Visa card. The pilot is to start with 200 branches and a national rollout is planned 'this summer'.

"Chase Liquid is a low-cost alternative to traditional checking accounts, and its terms are clear and simple," said Ryan McInerney, CEO of Consumer Banking. "We are very proud of the product and think it will make a positive difference in our customers' lives. They can use Chase Liquid to make everyday purchases, pay bills and more, without any surprise charges."

The product solves problems for customers and banks and many similar accounts are likely to appear in the coming months. Although there is nothing new in the individual elements offered the way it is grouped together will have significant appeal. For customers the product offers cash-in cash-out services without complication, credit scoring, or the need for large monthly deposits. It avoids the danger of inadvertent overdrawing and the related charges. For the bank it provides a low cost offering to customers who were not profitable because of low levels of monthly deposits and sometimes high administration costs without the ability to collect fees. It is also not coincidence that a variant of the same account with a little bit of technology becomes an electronic wallet account.

An issue to be addressed is that of interchange fees for card usage on this type of card in the US. It is our understanding that a prepaid card linked to a bank account, as this is, does not have the interchange restricted by the controversial US Card Act. If banks were to get greedy and use this loophole to charge significantly more than they do for regulated debit cards then the promised 'widespread availability' of merchants where the card can be used may be compromised.

American Express has chosen the same week to launch a prepaid card aimed at US students.

[See Newslink: AmEx pre-pay targeting US students ]