Last year, nearly three in 10 adult Americans were either “unbanked” (they had no accounts at banks or credit unions) or “underbanked” (they may have had a savings account, for example, but also use check cashers and payday lenders to meet their banking needs). This according to a new study by the FDIC. That’s down slightly from 2013, but it’s still a significant number.

Unbanked and underbanked consumers represent a huge market opportunity for prepaid card companies. Yet, many prepaid companies struggle with attrition rates that are two to three times those of other financial accounts. The Federal Reserve Bank of Philadelphia reports the typical prepaid debit card is discarded within six months, although there is variability. Off-the-shelf general purpose reloadable cards, for example, are typically active for just two months, while payroll cards are active typically for just over four months, according to the Fed’s research. Since customer acquisition costs get amortized across the life of a product, this much churn can be devastating for prepaid card programs.

Americans choose to be unbanked or underbanked for any number of reasons. Some don’t like or don’t trust banks. For others it’s a cost issue – they live paycheck to paycheck and can’t run the risk of overdraft and NSF charges. For still others it’s a matter of convenience. There are entire swaths of the working population who don’t have the option of Direct Deposit, and among these there are millions without nearby bank branches or transaction-free ATMs. Others have been blacklisted (for reasons such as excessive overdrafts). Still others are unemployed, or over their heads in debt. 

Then there are millennials. Millennials are not big fans of banks. In one recent survey 71% of millennials said would rather go to the dentist than deal with a bank. More than a fifth have never written a check to pay a bill, according to a report by First Data Corporation. Sixty-three percent of adult millennials don’t even have credit cards, First Data reports. 

While consumers have many options for purchasing prepaid cards off the rack, payroll card distribution is controlled by employers. This creates a unique set of challenges to building customer loyalty, which can be addressed by leveraging the near ubiquity of smart phones for both transactional and promotional purposes. 

Prepaid debit card providers can build recognition and trust by providing prepaid cardholders with a first-rate mobile banking experience. A combination of techniques can be used that include straight-forward customer access, diligent data base management, email personalization, meaningful social media engagement, and features that help cardholders manage their financial lives. Personalized welcome notices, transaction confirmations, behavior-based messaging, and targeted social media campaigns are just some of the ingredients of a winning strategy. 

The fundamental element of any successful prepaid debit card program is understanding cardholder needs and preferences. Mobile is a must, because while Americans may choose to be unbanked for any number of reasons, few choose to go without smartphones and/or tablets. This is particularly true among millennials – that generation of 80 million Americans seemingly always on the go that is forecast to control $7 trillion in liquid assets by 2020.

The financial services marketplace is changing, and millennials are at the forefront of that change. Millennials are driven by technology and innovation. They are the app generation, and as they mature and acquire wealth, financial apps assume even greater importance.

Prepaid debit card companies are positioned to take advantage of these marketplace changes. To succeed they must be able to help cardholders manage their financial lives, on the go, with meaningful interactions and minimal disruptions. Those that do will be best positioned to win the cardholder loyalty challenge going forward.