Abstract
When a prepaid card program will achieve profitability is proving difficult to
calculate. This challenge comes from a range of variables that needs to be
factored into the profitability calculations, and while some of these
variables are well known, many are new and specific to particular prepaid
program implementations. Because these variables are typically addressed on an
ad hoc basis, initial calculations of program profitability are often far from
the mark. Players already active in the prepaid industry regularly confront
this reality. New prepaid participants, or potential sponsors of prepaid
products, will be daunted by calculating profitability in a constantly
changing environment. Miscalculations can stem from various sources - legal
and regulatory, merger and acquisition activity, even divergent perceptions of
the different players in the prepaid value chain who bring the prepaid program
to market. In this Research Note, Mercator discusses how to navigate toward
profitability in prepaid while avoiding some of the difficulties that can run
the ship aground.
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