Prepaid card applications were first hyped several years ago. Then came a number of small niche players, many of whom have since ceased trading. In 2009, activity appeared to increase again with a number of new initiatives and many transaction processors have been positioning themselves in this market.
Gift cards currently show the greatest volumes and penetration. However, it is foreseen that this will change with general open-loop card gaining market share (up to 45% of total prepaid cards by 2015). As the prepaid market is so diverse, covering a range of sectors, it is impossible to list all the market forces in operation. Then focus is made hereafter on the main general sectors: the financial institutions as issuers and government.
For financial institutions, prepay simply represents an opportunity to address new markets and increase their customer base. They have many opportunities open to them:
- As issuer of multi-purpose open loop cards or as BIN sponsor (Bank Identification Numbers sponsor) managing the relationship between the card scheme and merchant and ensuring regulatory compliance. This is attractive to the more cautious banks. An example of a bank active in this area is the Newcastle Building Society, which partners with many eMoney and merchant service providers in the Uk to offer prepaid cards either directly to consumers or via thirdparty merchants. Here, there is an opportunity to offer SMEs a differentiated services to increase loyalty and attract new business accounts.
- As transaction processor to capture volume of transactions in order to make profitable the prepaid platform investment.
- As program manager to define, start and test new services. This has the advantage that the bank does not incur the full investment costs of implementing the program and can sit back and evaluate the market acceptance.
For government agencies, some key drivers are improved efficiency, transparency, and service delivery. Government agencies are huge employers and, as such, the potential market for payroll and pension benefits is significant. For example, Uk Home Office statistics claimed in February 2008 that 5.8 million of the Uk's total workforce of around 29 million is employed within the public sector. Many EU countries have more than 2.5 million public employees. In addition, of course, government agencies also distribute a variety of benefits such as unemployment, disability, and child allowances. Currently, cash is the main way benefits are distributed across Europe.