The trend of card payments outpacing other forms of spending is just the tip of the iceberg these days. Because cards have been a successful channel, banks and card issuers continue to mine for plastic profits by targeting new customers, who can also benefit from updated prepaid services, according to card issuers.
"The prepaid market is a very important initiative for Visa," says Todd Brockman, vice president of prepaid products, Visa (Foster City, Calif.). "We are actively engaged in this new category of payments. We look at prepaid as a third category - in addition to credit and debit. Prepaid gives us an opportunity to tap into those disbursement channels that we couldn't tap into before."
In addition to traditional prepaid cards, such as store gift cards and traveler's services, customers who do not qualify for credit cards or do not have bank accounts can take advantage of prepaid cards that have the same capabilities as a debit card. According to analysts and card issuers, prepaid cards, though a smaller market compared to debit and credit transactions, now are growing in a big way.
"In the past few years, debit cards have exploded," says Richard Cornelius, managing partner, North American payments practice, Accenture (Bermuda). "An area that is beginning to explode is the prepaid segment."
Card issuers such as Visa and MasterCard (Purchase, N.Y.) are offering services such as payroll cards around the prepaid concept. These cards act as the intermediaries between employer and employees, eliminating trips to banks for deposits. An employee's card is refilled by the employer for a pay period and the employee can use the card to make purchases and pay bills - online or wherever Visa or MasterCard cards are accepted, Cornelius says.
Other examples of products in the prepaid card market include teen cards, which allow parents to set prepaid balances for their kids, and government-issued cards for those who receive checks for child support or other types of financial support from the government.