Following the resounding success of its prepaid Synovus
Connections Card in the trial markets, Synovus Bank, a unit of
Synovus Financial Corporation
), announced the launch of the card at all its branches. This card
is an alternative to a checking account for convenient payments.
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The card will be particularly appealing to customers paying
check-cashing fees if they do not have a checking account. Also,
the bank will not charge for reloading this card.
This prepaid card also offers other supplementary benefits like
enabling the customers to make purchases from stores where
) cards are accepted and obtain cash back during such purchases.
Further, customers can withdraw money from ATMs as well as use it
for online or phone purchases.
Mainstream banks have been hit hard by the current sluggish
economic environment coupled with new regulations. Thus, they are
looking for alternatives in an effort to improve their financials.
With the implementation of the Durbin Amendment, the prepaid cards
have become a beneficial entity for banks. This amendment compelled
the banks to charge merchants with lower fees when their customers
pay through debit cards. However, this is not applicable on prepaid
cards, thus allowing banks to impose comparatively higher fees on
merchants if payments are made through these cards.
Synovus has recorded lower non-interest income compared with the
prior quarter, mainly due to various financial regulations. Hence,
we can conclude the aforementioned measures were taken by the
company to augment its non-interest income and to gain market share
in the rapidly growing market for prepaid cards.
Synovus currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. Also, considering the fundamentals, we
maintain our long-term Neutral recommendation on the stock.