I never thought I’d say this ... but we need to talk about Justin Bieber. Or, more specifically, Justin Bieber prepaid cards. By partnering with BillMyParents, the popular singer has joined the ranks of celebrities who help sell third-party financial services to specific consumer segments such as the unbanked, the young, and the elderly.
Prepaid cards seems to be the largest channel for celebrity endorsement, drawing big names like Suze Orman, Hillary Duff, Usher, George Lopez, and Magic Johnson. Perhaps the most notorious of these, as highlighted by my colleague Rebecca Wessler, was the fee-ridden Kardashian Kard.
But the trend doesn’t stop at prepaid. Montel Williams currently endorses the payday lending network Money Mutual, and Fred Thompson and Henry Winkler pitch reverse mortgages which — if taken too early in life or received via a large lump sum payment — can hurt retirees more than they help them.
It’s no wonder these endorsements have seen such proliferation in the for-profit market. Anita Elbersem, an associate professor at Harvard Business School, and Jeroen Verleuni, a Barclays Capital analyst, found that consumer brands promoted by celebrities experienced an average 4% jump in sales within six months. Some even see spikes of up to 20%.
While many prepaid and alternative products are fee heavy, not all are considered predatory. And some like BillMyParents — which lets parents load funds on the card and notifies them of their teen's spending activity — do deliver on the promise of user control and of being a learning tool for young borrowers, in exchange for the extra cost.
If these companies are selling a face, credit unions looking to compete must focus on selling an idea. That is, that everyone deserves lower interest rates, fewer fees, and solutions that help eliminate short-term loan dependency, not accelerate it.
Several institutions have demonstrated that it is possible to serve these alternative markets safely, without charging users an arm and a leg (Hint: It’s a tad easier if you don’t have Lady Gaga or Pitbull on the payroll).
Financial marketing should be about more than a celebrity name — it should be about a community, the unique people in it, and the financial institutions that responsibly serve it. And if you find your products do need an extra boost of awareness to compete, remember that local heroes can be extremely influential in your specific community and are available for a fraction of the cost of a national icon.