Millennials and the Rise of Prepay

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March 14, 2018

Outline

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Why Millennials, and why Prepay? Are We Ready for the “New” Prepay? Prepaid Electricity is Trending Where is Prepaid Electricity best suited for Energy Retailers? What’s the takeaway?

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“This group is swiftly becoming the largest and most influential U.S. demographic group. For energy providers, ignoring them just as they

become energy consumers could mean losing this group to an increasingly complex set of new competitors and market entrants,

eagerly waiting in the wings.”4

- Forbes.com

Why Millennials, and why Prepay?

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Millennials are poised to represent the largest generation in the US.

MILLENNIALS

Prepaid electricity, as a product choice, is trending

upward.

PREPAY ELECTRICITY

Millennials have a clear preference for prepaid

cards over credit and even debit cards.

PREFERRED PRODUCT

Why Millennials?

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2016 U.S. Census Data1

71 million Millennials

74 million Baby Boomers

By 2019

73 million Millennials 72 million Baby Boomers

Why Millennials?

•  NYC and LA remain millennial magnets •  Smaller cities however, are seeing the

greatest growth2

•  In Texas, young populations are growing particularly fast

•  Houston #2 •  Austin #3 •  San Antonio #7

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Why Millennials, and why Prepay?

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Of “Millennials with Money” prefer using prepaid cards3 to credit cards and debit cards

60%

They’re big, they’re bad, and they like prepay!

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80% Of US prepaid card owners are Millennial or Gen X8

24% Are early adopters4

30% Of total retail

sales4 by 2020, about $1.4

trillion

63% Have NO credit

cards5

70+ M Millennials

Why Prepay?

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83% of millennial prepaid card users ALSO have debit cards, so why the preference?

To avoid debt. And it’s less about “anti-credit card” and more about “risk of debt.”5

To better budget and track their spending

Adhere to the “mobile first” mentality.7

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Are We Ready for the “New” Prepay?

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Prepaid Electricity is Trending

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Current Adoption

Rates

Anticipated Adoption

Rate in 2020

Similar Industry Mobile Phone

Plans

Adoption rates for prepaid electricity have risen over the

years. Utilities have moved from “pilot” to “launch.”

2014 Survey8 shows Prepay is now considered a “Mega-Trend” with a clear “generational” shift

Mobile phone industry adopted prepaid plans

long ago. They’ve made prepay “sexy.”

5-10% 20% 32%

Prepaid Electricity is Trending

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Why the interest in prepay electricity?

43% see it as an option for bad debt (OLD)8

31% feel it is newer and more convenient8

45% feel it would increase communication with

their utility8

27% see it as a means to save money on energy

bills8

Where is Prepay Best Suited for the Energy Retailer?

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7 million smart meters 20% = 1.4 million

Currently <150,000

Pilot planned for AEP-Ohio Enrollments begin Q3, 2018

Petition pending Maryland PSC Case No. 9641

Implementation June, 2019

Old Prepay Start in markets that support SCB

“New” Prepay The sky is the limit

What Are the Key Takeaways?

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For Baby Boomers – “It’s Over” For Millennials – “I’m not gonna’ be ignored”

Prepaid electricity, like prepaid cards, is trending, largely due to the Millennials.

2020 is the year! Focus on the “new” prepay and create a “mobile first” buying experience

Partner with someone who knows prepay, and can offer it as a complimentary product to postpaid billing

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Sources

1.  http://www.pewresearch.org/fact-tank/2018/03/01/millennials-overtake-baby-boomers/

2.  http://time.com/4797956/cities-millennials-moving/

3.  http://time.com/money/4182923/millennials-prepaid-cards/

4.  https://www.forbes.com/sites/energysource/2016/08/25/energy-providers-must-engage-millennials-today-or-risk-losing-them-as-customers/#9daadee6411a

5.  https://www.bankrate.com/finance/credit-cards/more-millennials-say-no-to-credit-cards-1.aspx

6.  http://www.businessinsider.com/the-rise-of-reloadable-prepaid-cards-could-affect-the-way-millennials-approach-banking-2016-4-2

7.  https://www.medialogic.com/financial-services-marketing/blog/are-millennials-making-prepaid-cards-the-must-have-payment-product/

8.  http://defgllc.com/publication/prepay-energy-at-an-inflection-point/

9.  https://www.cnbc.com/2015/04/06/prepaid-debit-cards-on-rise-thanks-to-millennials.html ttp://time.com/4797956/cities-millennials-movin

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