Prepaid card usage is on the rise. Frequently considered as a near-perfect cash replacement solution, it has been proved to be more beneficial than either a credit or debit card
According to the US Federal Reserve Bank, while users of prepaid cards are still relatively small in number, the use of this payment instrument grows faster than other non- cash payments such as checks, credit and debit cards.
The Prepaid Market Sizing Report prepared by The Boston Consulting Group reveals that in the United States alone, “the total value of the branded prepaid card opportunity ... is expected to surpass US$440 billion by 2017, nearly quadrupling its estimated value of US$120.2 billion in 2009.”
US-based management advisory firm Bretton Woods agrees: “Reloadable prepaid card usage has increased significantly and is poised to grow dramatically as a viable alternative to basic checking accounts.”
For Visa Philippines manager Iain Jamieson, prepaid card business is very promising in the Philippines as as more Filipinos find it more convenient to use their cards online for their must- haves. So far, Visa has approximately 4.5 million debit and prepaid card users in the Philippines, which Jamieson expects to continue to rise in the coming years. In fact, Visa is now expanding its prepaid card operation in the country.
What makes prepaid cards beneficial over other non-cash payment instruments in the context of an increasingly cashless economy?
First, applying for a prepaid card is hassle-free. You don’t have to submit documents and undergo a credit investigation. This is good news for the unbanked and underbanked as it gives them an opportunity to join the financial mainstream of an emerging card-based economy.
Second, it does not have to be linked to a personal bank account. All that it requires is a pre-loaded amount deposited onto the card, which sets the cardholder’s spending limit. This is a good way to minimize risks and frauds, promote financial responsibility, and better manage one’s financial resources.
Third, there’s relatively no limit to its use. With a prepaid card, you can fund the spending needs of your loved ones, or even your employees, without the risk of overdraft. It can also be used for gift giving, voucher replacement, per diem payment, business travel and expense management, payroll and incentives payment, among others.
Fourth, it is convenient. As Bretton Woods puts it, “Reloadable prepaid cards provide the convenience of ATM access and point-of-sale purchases, many with cash back features at no cost, bill payment capabilities and free account inquiries, all of which compare favorably to bank checking accounts.”
Fifth, while traveling, you can use it as an alternative to cash and/or traveller’s checks. Some prepaid cards even offer lost luggage reimbursement, emergency card replacement and zero liability in case the card is lost or stolen.
A survey conducted by Network Branded Prepaid Card Association shows that an astounding 80% of consumers are satisfied with their prepaid card experience. Many of them would even recommend the product to relatives and friends.
These consumers, says Tony Craddock, CEO of Global Prepaid Exchange, “are increasingly aware of the products and are now evaluating the benefits; a process that should certainly produce improved sales.”
“When you couple increased interest with consumers’ predictions of their own behaviour,” Craddock adds, “the clear implication is that the industry is set for near-term, significant growth across the countries investigated.”
Print ed: 04/12