By Evan Bakker,  BI Intelligence From Business Insider

Prepaid cards were originally targeted at consumers with minimal access to financing or bank accounts. However, the appeal of these cards has broadened, attracting traditional banking customers as well. This is because the formula behind prepaid cards resonates with the growing population of debt-averse consumers — namely, millennials and Gen Xers — who recently suffered through the Great Recession.

The prepaid cards industry is diversifying. Higher-end issuers like American Express are now pushing prepaid cards like Serve and Bluebird to customers, and these cards are seeing stellar growth in terms of spending volume. The push by these issuers is adding dynamism to the prepaid cards market.

Younger consumers, in particular, are adopting prepaid cards, and many cite the avoidance of overdraft fees and debt as motivating factors. Prepaid cards are ultimately giving consumers an avenue to escape from the unsavory fees that banks charge on credit and debit cards, and any measurable shift away from these products could dent banks’ retail banking revenues.

In a new report from BI Intelligence, we take a close look at the prepaid cards industry in the US, the prepaid card’s evolution into a product for both banked and unbanked customers, and its potential to drive a shift away from debit and credit cards. We also examine how negative consumer attitudes toward credit and debit open an opportunity for prepaid cards, and how this opportunity can challenge traditional approaches to banking.

Here are some of the key takeaways:

Prepaid cards are a small but fast-growing payment instrument in the US. In 2003, prepaid cards accounted for 800 million transactions worth $20 billion. These numbers jumped to 9.2 billion and $220 billion in 2012, and we estimate that prepaid cards will generate $317 billion in volume this year.
Millennials and Gen Xers are driving the adoption of prepaid cards. The two youngest adult generations in the US accounted for 80% of US prepaid card owners in August 2013. Among prepaid card owners, 28% earn less than $25,000 per year, 21% earn $25,000-$49,999, 26% earn $50,000-$99,999, and most surprisingly, 27% earn $100,000 or more per year.
Prepaid cards could disrupt traditional banking. Millennials, now the largest working generation in the US, largely have an aversion to credit cards. Moreover, debit cards charge high overdraft fees that many consumers identify as a huge motivating factor for adopting prepaid cards. Prepaid cards are opening an avenue for consumers to escape from the unsavory fees imposed by banks’ traditional deposit accounts.
Imminent regulations by the Consumer Financial Protection Bureau (CFPB) could limit prepaid’s advantages. The CFPB is set to finalize regulations that could increase the costs of mounting a prepaid program, making this market potentially less attractive to issuers. These regulations could stall the industry’s progress.
In full, this report:

Gives a high-level view of the prepaid cards market in the US by showing total transactions and volume in comparison with credit and debit, and estimates prepaid volume in 2015.
Shows the demographics of prepaid card customers by generation and income level.
Explains the entire life cycle of a prepaid card, along with the transaction and reload processes.
Provides data showing how and why people use prepaid cards.
Provides data about consumers’ attitudes towards credit cards and the overdraft charges imposed by debit card accounts.
Examines imminent prepaid industry regulations and analyzes how they could impact the industry.
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For more on this story go to: http://www.businessinsider.com/the-rise-of-reloadable-prepaid-cards-could-affect-the-way-millennials-approach-banking-2015-11?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+businessinsider+%28Business+Insider%29