Chase and Starbucks Team Up to Launch Prepaid Visa Card

by Ben Jackson 0

Starbucks Coffee Co. said at its shareholders’ meeting that it plans to offer a new prepaid Visa card in conjunction with Chase by the end of the year.

A representative for Chase said the Starbucks prepaid card will not have monthly service or reloading fees, which often come with prepaid cards. Chase said the card will have three fees; a $5 fee for a rush card replacement, a 3 percent foreign transaction fee, and a $75 legal processing fee, which would be triggered if the bank was required to hold or pay out funds from the account as a result of a legal action.

Starbucks said that the card would allow people to earn rewards through its loyalty program by spending with the Chase card. Photos of the event show a card that includes an EMV chip.

The real question is what does this mean for the prepaid industry as a whole? While consumer-focused prepaid cards have typically found an audience among the unbanked and underserved, this is likely not the core audience for Starbucks coffee.

With a low-fee structure, however, the card may attract attention from other program managers’ customers. Still, as the experience of American Express Bluebird shows, low fees are not the only reason that people select a prepaid card.

The real pressure on other companies’ cards may come from the fact that a consumer-focused card includes an EMV chip. While many prepaid providers are trying to wait as long as possible to add EMV to short-lived cards, the competition or marketing perceptions may force their hand sooner than they would like.

The outstanding question is who the companies see as the users of these cards? Are they after the upscale coffee drinkers looking for a budgeting tool or trying to reach down market? Does Chase believe that these Starbucks customers might represent a greenfield for its other banking products? Time and marketing spend will tell.

Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group

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