Fintech companies are finding prepaid cards are the way to connect digital systems to real world payments. Square has opened up its prepaid card program that draws on funds in a Square user’s account, to all users of the service.
The Square Cash Card more closely resembles a prepaid card than a debit card, since it’s only able to draw on funds in your Square Cash account and not your bank. The big difference is it serves as a way to use your Square Cash funds in stores, instead of having to transfer out funds to a regular debit card or hope that your retailer supports Apple Pay to use these types of virtual cards.
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Meanwhile, rumors are flying that Venmo is about to offer a similar kind of card. Recode is reporting that Venmo employees are testing plastic cards, which would offer direct access to Venmo balances at the point of sale.
Venmo has been testing its own version of a physical debit card that would allow people who use its app to make purchases in brick-and-mortar stores using money stored in their Venmo account, according to multiple sources.
The Venmo feeds of some employees seem to confirm public testing of these cards, showing Venmo purchases being made at fast-food chains like Chipotle and Taco Bell, as well as small mom-and-pop shops.
The two products show how prepaid cards are once again leading the way in terms of financial innovation. Prepaid is a logical choice for building new products because it provides a source of good funds and allows people to access spending power without needing to apply for credit or link a checking or savings account. It is a way to manage risks for consumers, suppliers, and merchants until the bigs og a new payment system are worked out.
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Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group