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Prepaid Revolution part 3: what this will do for bank stocks 

TLDR: prepaid accounts and cards are not a good trend for incumbent banks, the kind of banks that make up a bank Index ETF such as KBE.

I Am Not A Financial Advisor (IANAFA),  Do Your Own Diligence (DYOD). Many investors think bank stocks are good value today. I am wary of bank stocks for two reasons. One reason is that their balance sheet is difficult to understand due to derivatives. The other reason is the disruption threat from Fintech ventures. Specifically prepaid accounts and cards are a threat to three big revenue lines for banks:

 

 

PrePaid accounts and cards are a great market entry for digital challenger neobanks. The product is simple to build and onboarding is easy because no credit check is needed. This is classic low end disruption; new ventures get to scale with a simple product and then expand functionally.

Stay tuned Expanding from prepaid into lending is the subject of the final part 4 of this series next week.

Bernard Lunn is Editor and CEO of Daily Fintech and author of The Blockchain Economy

Daily Fintech’s original insight is made available to you for US$143 a year (which equates to $2.75 per week). $2.75 buys you a coffee (maybe), or the cost of a week’s subscription to the global Fintech blog – caffeine for the mind that could be worth $ millions.

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