Prepaid Cards Grow in Popularity Across Consumer Segments

Prepaid cards are offering the incentives that consumers are looking for and they are providing the return on investment that businesses are looking for.

Expected to reach more than $427 billion in 2011, according to the Mercator Advisory Group, the prepaid market is reaching shoppers through rebates, employee incentives and shopper loyalty programs.

Prepaid cards not only drive shoppers to a brand, they motivate shoppers to spend more than the face value of the card, according to new findings from a survey conducted by Retail TouchPoints and research firm Decision Tree Labs. A total of 51% of card recipients who received the card through a rebate program spent more than the value of the card, according to the survey commissioned by TSYS Loyalty & Prepaid. Additionally, 43% of consumers who received a prepaid card as part of a contest or drawing spent more than the value of the card; and 41% who received the card as an employee incentive spent more than the value of the card.


The Perfect Storm For Prepaid GrowthIt’s been commonly known, for a number of years, that prepaid cards offer benefits to businesses including reduced processing costs, greater operating efficiencies and the ability to collect user data with paperless electronic transactions. But the increasing consumer awareness and acceptance of the cards, along with new, more sophisticated back-end infrastructure, has created an ideal scenario for substantial growth.

In 2010 close to 90% of consumers surveyed said they are familiar with prepaid cards; and 40% said they had received a prepaid incentive card within the last 12 months.

The familiarity and acceptance is spread equally across age groups. Approximately 20% of survey respondents came from each of 5 age groups, varying from 18-25 up to 55+.

Open-Loop Is Top Dog
Given 6 incentive choices, consumers prefer the open-loop prepaid card (30%) over a check (25%), closed-loop card (15%), merchandise (15%) and gift certificate (15%). Open-loop cards are redeemable through any channel that accepts network-branded cards such as Visa, MasterCard, American Express and Discover.

Open-loop prepaid cards are expected to continue and expand their dominance. The segment will grow at a compound annual growth rate of 22.4% from 2008 to 2013, as reported in the TowerGroup’s study titled “Global Prepaid Commercial Cards Outlook: Do the Results Match the Hype?”

In fact, the amount loaded on to open-loop cards increased to $5.8 billion in 2010, up from $4.24 billion the previous year, according to Mercator Group’s 7th Annual Open Loop Prepaid Market Assessment.

The Social-Prepaid Connection
Forward-thinking businesses are quickly finding ways to incorporate social media into the prepaid card revolution. The reasons are clear: more than 40% of survey respondents would post a favorable product review on a social network in order to receive a $100 prepaid card; and 24% of consumers would provide 5 email addresses for a $100 card, according to the survey.

To motivate consumers to fill out an online survey, businesses can offer a $10 prepaid card and receive an 87% response rate.

The potential is boundless at a time when consumers are actively looking for ways to receive an additional perceived value for their everyday purchases, shopping behavior and online activities.

For more on the prepaid revolution, click here to download the complete survey report.




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