The millennial generation, born between early 1980s through 2000s are the most tech savvy and progressive of all generations. 64% of the total population in India consists of Millennials or Gen Y as per the Economic Survey 2013-14. In this digital era, they appreciate flexibility and value freedom of choice in everything including alternative payment tools. The prepaid cards, an alternate payment tool was always thought of as an instrument for the unbanked and underbanked segment. But, the millennials have embraced the prepaid cards in large numbers. In the USA, even high income millennials are fond of this alternative system. Studies show that Millennials exhibit similarities in money management characteristics throughout the globe. So, Indian millennials are not far behind in wanting such diversity.
“As millennials have the highest access to formal credit than generations before them, they are at risk of falling into debt traps. Millennials need to develop an understanding of when to save and when they can spend.” -Arundhati Bhattacharya, Former Chairperson, State Bank of India.
In India, the number of young borrowers taking loans in rising and is 40% of the total borrowers currently. Hence, more and more Millennials are growing conscious of the debt they carry. They want to dilute their risk by using Prepaid cards instead of Credit Cards and not getting into the vicious cycle of Bad Credits, stress and paying high interests to the bank. Missing on credit card payments would mean a poor credit score that leads to difficulty in getting car loans, personal loans, mortgages and enhanced lifestyles. Prepaid cards aid controlled spending and also saves them from high transaction fees. Majority of Millennials get attracted to this alternate payment options also because of the discounts & offers attached to them.
The prepaid cards would help in thoughtful spending as it does not allow you to borrow. Although Pre-paid cards cannot completely replace credit cards, it encourages using such a risky payment tool wisely. Gen Y likes to diversify and choose their money management tools unlike earlier generations. Prepaid Cards is a trend that is growing and will make a difference in the financial market. A trend, that is compelling the financial service providers, policy makers and regulators to reconsider the traditional ways of monetary transactions.