Enabling Pre-paid Solutions: Expanding in the UK and Europe
A prepaid card is effectively a debit card pre-loaded with a sum of money. Once there is money on the prepaid card, it is treated the same way as any MasterCard, Visa or American Express card. The prepaid card can be used to make purchases on the high street, over the phone or on the Internet – especially helpful for those among us who have a preference for cash yet still wish to fully participate in the ebay phenomenon.
However, business cases for prepaid are often exaggerated, tenuous and overly optimistic. This is especially true for the ‘blue sky’ proposals, opportunities that seek to create a new market often with unrealistic customer acceptance and usage criteria to justify the business case. More realistic and thus potentially more profitable are the substitution or replacement prepaid business cases. These are opportunities where there is already:
The British have a long-established love affair with plastic. This is reflected in the fact that over the past decade, the value of transactions made on debit and credit cards has more than doubled, according to Datamonitor, the market research group. In fact, personal spending on debit and credit cards overtook cash for the first time in 2004 and this change was mainly driven by debit card use.
Similarly, the MasterCard/PSEL Draft Report of April 2006 predicts substantial increases in transaction values through to 2010.
In any new market, speed and flexibility are paramount. Of equal importance in the prepaid environment are compliance and security. Both are mandatory for any prepaid solution offering.
Many financial, retail and corporate organisations choose to outsource the payment processing element of prepaid cards as it simplifies and speeds their route to market, enabling them to market and sell direct to their end user or business customer.
Many lead with open loop cards, cards can be used anywhere a MasterCard or Maestro logo is displayed, to further enhance their brand and range of usage opportunities. Closed loop cards are those which can only be used for payment to a specified merchant, for example, retail gift cards that are usually branded with the retailers design.
Speed to market and flexibility are just two significant benefits of employing an outsourced payment processing solution.
Other benefits include:
During the past 12 months it has become clear that the role of the payments processor has extended beyond the provision of a scalable, flexible and cost-effective payments platform. The payments processor is often the facilitator of introductions and connections to key partners such as BIN sponsors, card schemes and card and PIN production companies. This level of support is particularly appropriate in new markets where experience and good quality advice can be hard to find.
Prepaid is constantly evolving to cater for the market and the diverse range of industry sectors in which it operates. While research continues to point to massive exponential growth in prepaid markets across the world, this does not mean that simply issuing a prepaid card will guarantee success.
As the market begins to mature remember: branding is key, simple is good and looks are important. And ask yourself the question: why would someone want to put your prepaid card in their purse or wallet?