Opportunities in Prepaid Cards

Table of Contents

• Overview
  • Catalyst
  • Summary
  • Methodology
• Table of Contents
• Table of figures
• Table of tables
• Introduction to prepaid cards
  • What is this report about?
  • Who is the target reader?
  • How to use this report
  • Defining prepaid cards
  • This report will only focus on general purpose prepaid cards
• Opportunities in prepaid cards
  • Introduction
  • Growth has been rapid in several markets
    • In the US, transaction volumes on Visa-branded prepaid cards has doubled during 2005
    • In Latin America, Visa-branded cards rose to 3.3 million by March 2006
    • In Europe, Visa-branded prepaid cards were the fastest growing payment card segment in 2006
  • Prepaid cards can be divided into two segments
  • Opportunities in prepaid cards issued directly to consumers
    • Teen cards have been introduced to capture the teen segment
      • There are two categories of teen products
      • Targeting the teens through the internet
      • The teen segment is also a potential market for POS purchases
      • The take-up of teen cards varies according to the market where it is issued
      • Teen cards issuers at a glance
    • Case study: Visa Buxx - surviving in the volatile US teen market
      • Visa Buxx issuers at a glance
      • The ability to go overdrawn on the card is a potential loophole
      • Datamonitor Cards and Payments Team view
    • General purpose gift card programs are becoming widespread
      • Gift cards are advanced in the US
      • There has been growth in the number of gifts cards available outside of the US
    • Case study: Discover Gift Card - a gift card suitable for any occasion
      • Datamonitor Cards and Payments Team view
    • A similar approached to gift cards has been adopted to replace traveler' s cheques
      • Travel card issuers at a glance
    • Case study: American Express Travelers Cheque Card - a safe way of carrying money abroad
      • The Travelers Cheque card offers additional benefits compared to traditional traveler' s cheques
      • The fees may prove an obstacle to take-up and there are a number of limitations
      • Datamonitor Cards and Payments Team view
    • Virtual prepaid cards target consumers, who are wary of entering personal details online
    • Case study: Visa 3V card - a unique prepaid card program with virtual applications
      • Datamonitor Cards and Payments Team view
    • There are a number of prepaid card programs aimed particularly at unbanked consumers
      • General purpose card issuers for the unbanked at a glance
    • Case study: MasterCard CashPlus Gold - a card with a multitude of applications for the unbanked
      • The MasterCard CashPlus Gold card offers the unbanked the facilities of a current account
      • However the product is costly and has usage limitations
      • Datamonitor Cards and Payments Team view
  • Opportunities in prepaid cards issued to beneficiaries
    • Payroll cards have been designed as an alternatives to traditional payroll cheques
      • Payroll cards were first introduced in the US market
      • The UK has seen development in payroll cards
    • Case study: Bank of America Visa CashPay card - a prepaid card program for employees without a current account
      • Datamonitor Cards and Payments Team view
    • Prepaid card programs have been adopted to enable insurance and reimbursement payouts
    • Case study: KLM MasterCard CashCard - a prepaid card that helps businesses to improve customer relations
      • Datamonitor Cards and Payments Team view
    • Governments see the benefits of introducing prepaid card programs to replace paper-based processes
      • Prepaid card programs have been extended to provide disaster relief payouts
    • Case study: PKO Bank Polski Maestro Municipal card - a cost-effective alternative to distribute social benefits
      • Citibank Hadlowy also operates a social card program in Poland
      • Datamonitor Cards and Payments Team view
    • Case study: American Red Cross Chase MasterCard card - a prepaid card program developed to provide disaster relief assistance
      • Hurricane Katrina was the major test for prepaid card programs designed to provide disaster assistance
      • Bank of America developed emergency relief cards based for businesses to distribute to employees
      • Datamonitor Cards and Payments Team view
• Conclusions
  • Introduction
  • Prepaid cards have the greatest potential where they replace a more costly alternative
    • The government sector arises as the prominent market to benefit from prepaid card programs
    • Private sector also offers numerous opportunities for prepaid card issuers
      • Payroll cards are the main example of prepaid cards that employers would find attractive
      • Prepaid cards have potential to be implemented in insurance payouts and reimbursements
    • Prepaid cards issued directly to consumers are likely to remain a niche market, but there are some opportunities
      • Travel cards present the biggest opportunity within cards issued directly to consumers area
      • Commercial clients may see the benefits of introducing prepaid cards for gifts, promotions and rebates
      • By contrast, gift cards are unlikely to appeal to consumers at large because of the fees involved
      • Teen and virtual cards offer limited opportunities, although capturing the teen has its benefits for issuers
      • High fees associated with prepaid cards aimed at the unbaked may restrict take-up of these products
    • However, security remains a concern and will need to be addressed
      • This may lead to tighter regulation of the sector
• APPENDIX
  • Definitions
    • ATM-only card
    • Co-branded card
    • Credit card
    • Debit card
    • ePurse
    • POS terminal
    • Prepaid card
    • A card that cardholders can load up and then only spend the amount that is loaded on the card. Some prepaid cards can be reloaded, while others can be used once only. There are different types of prepaid card, ranging from ePurses to gift cards to travel cards.
  • Methodology
    • Primary research
    • Secondary research
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • List of Tables
    • Table 1: Examples of issuers in the teen prepaid market, 2007
    • Table 2: Main issuers of Visa Buxx in the US, 2007
    • Table 3: Fees associated with Visa Buxx issued by U.S. Bank, 2007
    • Table 4: Examples of issuers in the travel card market, 2007
    • Table 5: Fees and limits for the Travelers Cheque card in the US, 2007
    • Table 6: Fees and limits for the 3V Visa prepaid vouchers, 2007
    • Table 7: Examples of issuers offering prepaid cards for the unbanked, 2007
    • Table 8: Fees and limits for the MasterCard CashPlus Gold cards, 2007
    • Table 9: Visa payroll cards issuers in the US, 2007
    • Table 10: Current relevant Datamonitor publications, 2007
    • Table 11: Future relevant Datamonitor publications, 2007
  • List of Figures
    • Figure 1: The two sub-categories of general purpose prepaid cards, 2007
    • Figure 2: Financial quiz on US Bank website teaches teens how to manage a budget in real life