An Open Letter To Justin Bieber (re: Prepaid Debit Card)

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Yo J-Man:

You don’t know me from Jack, but I’ve got some advice for you regarding your newly announced prepaid debit card, so I hope you’ll hear me out.

I may be a lot older than you, but we have a couple of things in common:

1. We’re both great singers. Of course, you sound great on a stage in front of tens of thousands of people. I, on the other hand, only sound good singing in the shower, with the water running. Naked.

2. Females scream when they see us. With you, they’re screaming out of some kind teen adulation and idolatry. They scream at me because I’ve done something wrong, or because I was singing. Naked.

Despite our similarities, there’s one big difference between us: I understand the world of financial services. And I’m betting you don’t.

Your prepaid debit card isn’t going to succeed and — out of the goodness of my heart — I’m going to tell you why, and offer you some advice on what you could do differently to improve the odds of the card’s success.

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First off, I really can’t blame you for getting into the prepaid debit card business. Piece of cake, isn’t it? You lend your name and image…and other people do the rest of the work. $3.75 million for 14 months of doing nothing must make Joe Biden really jealous. He only earned $375k in the past 14 months for doing nothing.

You don’t happen to know Kim, Khloe, and Klueless Kardashian, do you? You might want to take a look at their botched prepaid debit card initiative.

The overwhelming reason why your card won’t succeed is that you don’t understand who buys prepaid debit cards. It’s not the 13 year-olds with whom your brand name and draw is strong.

Four types of people drive the prepaid debit card market: 1) People can’t get checking accounts; 2) People who can get checking accounts but don’t want to (the Debanked); 3) People with a checking account who use prepaid debit cards as a tool to help them control their spending; and 4) Parents who want to give their kids a payment mechanism.

In markets like the cereal and toy markets, kids heavily influence their parents’ choice of products. Not so in the prepaid debit card market.

In other words, no one who actually gets a prepaid debit card cares that a card is sponsored by you, J-Dude. Oh sure, there are parents who will evaluate your card, but when they see the fees associated, they’ll probably turn somewhere else. Lots of cheaper alternatives on the market, and coming on the market. In other words, your star power won’t be enough to overcome the weaknesses of the offering.

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The CEO of the card company was quoted as saying that the card gives teens “freedom and independence while also teaching them the fundamentals of financial responsibility.”

As the father of a teenager, about-to-be teenager, and a former teenager, giving teens more “freedom and independence” isn’t a goal I’m particularly fond of.

But the need for better financial education, literacy — and even more importantly — discipline, is real. I would be a big fan of a card that can deliver that. But I really don’t see how your card does that. Your quip about watching one’s spending whether one has $100 or $100 million is nice, but are you really planning to provide any ongoing financial education around the card? Yeah, I didn’t think so.

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So here’s my advice to you. Do one of the two following things:

1) Pull a “mea culpa” and back out of the deal. Make a public statement that you’re pulling out. Blame it on your advisors, your agent, your parents, whoever, for getting you into a deal that capitalizes on your name at the expense of families who can’t afford the fees associated with the card. Yes, I know that the CEO of the card company said that “most fees are avoidable” but did you ask what percentage of existing cardholders are able to earn their way out of fees? Just because other fees charge an inactivity fee doesn’t mean your card should.

2) Really commit to being a spokesman…er, spokesboy…for teen financial literacy. What often passes as “financial education” is sorely lacking. Static web pages and brochures that lecture people about spending too much isn’t effective. Simplistic advice about “foregoing Starbucks once a week” and how it will save hundreds of dollars a year isn’t what’s needed by most teens (as well as adults). Teens need hands-on tools and real-life experience managing money in order to develop financial literacy. If you’re really committed to doing this, then revamp your card’s fee structure, make sure that the tools (online access, PFM, receipt management, etc.) are either in place or will be developed by your partner, and get out there and sell this thing. 

It’s your call Jay Bee. But thanks for hearing me out. 

p.s. Can I get an autographed picture of you? It’s for my daughter. Really.

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