In recent years, the financial landscape has changed dramatically with new economic challenges making it increasingly difficult for consumers to commit to recurring monthly payments. Inflation has risen to its highest level in 30 years, outpacing wage and benefit increases and further exacerbated by tax rises. Consumer concerns around inflation also remain “highly elevated”.
Against this backdrop of economic uncertainty, consumers are finding ways to manage their budgets while also staying loyal to the brands they love.
Among them is the use of prepaid top-up cards — a concept that has been around for 50 years but remains hugely popular and relevant, especially during these tough times.
The global prepaid cards market was valued at $2.2 trillion in 2020 and is expected to reach $3.9 trillion by 2026, growing at a compound annual growth rate (CAGR) of 9.5%. In the U.S. alone, the use of branded payments solutions has grown by more than 50% in the last five years.
New Opportunities for Consumers and Brands
Consumers like the flexibility of top-up cards to keep track of spending and access services even if they opt out of a subscription or do not qualify to sign up.
There are still millions of consumers across the U.S. outside the formal economy who do not have access to a bank account, so top-up cards make sense. Others just want a simple way to limit spending, and a prepaid card can help them manage their daily life. There is no credit check to pass, and they can only spend or withdraw the amount added to the card. Prepaid top-up cards have also been an important tool for big brands wanting to engage and grow their customer base.
These cards offer several benefits over traditional payment methods for brands, including increased data security, greater customer flexibility and convenience, and new opportunities for retailers around increasing brand loyalty and personalisation opportunities.
Increased Levels of Data Privacy
First, the promise to consumers is that their details are kept secure. This increased security comes from prepaid top-up cards not being linked to a bank account or credit card. In the event that a card is lost or stolen, the consumer’s financial information remains secure. Additionally, the consumer can only spend the amount of money loaded onto the card, reducing the risk of fraudulent activity.
This can be a powerful proposition as consumers are also growing more concerned over data privacy and becoming more aware of the potential risks of sharing personal information. These days, consumers want more control over who sees their personal details and how those details are passed along: 90% of customers want complete or some control over how their data is used.
The worries over how their data is used differ from continent to continent. For example, while identity theft and stolen credit card information are top worries in America, data privacy is the leading concern in China. Regardless of the regional circumstances, the overall trend is a global shift toward a heightened sensitivity to data privacy.
This has arguably been a critical factor in the rise of branded payment services. By definition, branded payments are essentially prepaid cards that give people access to popular brands and services without having to sign up for a subscription or reveal personal information. It is all about making it simpler, faster and safer for consumers to access their favourite brands on demand.
A Greater Degree of Flexibility and Convenience
One of the most notable benefits of prepaid top-up cards is that they provide customers with greater flexibility and convenience. Customers can quickly reload the card online or in-store, and they can use it at a growing number of locations — both online and offline.
Yet it is not only customers who benefit. There is a cost-saving element for retailers as branded payments become more popular. Big brands can save money by using prepaid top-up cards. By preloading the cards, the brand eliminates the need for credit card processing fees and removes the risk of chargebacks. This can result in significant cost savings for the brand, especially for businesses that process a high volume of transactions.
On Deepening Consumer Loyalty
The rise of these prepaid top-up cards also gives big brands a unique marketing opportunity. It enables retailers to offer promotions and discounts to customers who use the card and gives them the ability to notice customer spending patterns. This information can be used to create targeted advertising campaigns and to improve the overall customer experience, which can be especially helpful when big brands are looking to expand into new markets or territories.
Since retailers and brands can also access valuable data analytics, this information can be used to understand customer behavior better and to make informed business decisions. Brands can also use this information to personalize their marketing and engagement efforts, improving customer satisfaction and increasing brand loyalty.
In terms of loyalty, branded payments can also foster this by reducing the number of data touch points associated with making a purchase. Customers are more likely to return to the brand if they have a positive experience using the card, as they know they can quickly reload the card and make purchases in the future.
In conclusion, branded payments offer a flexible and secure alternative to traditional payment methods, allowing consumers to manage their privacy and engage with their favourite brands and services without having to reveal personal information. With the cost of living crisis and rising concerns over data privacy, the use of branded payments is expected to grow, making it an essential consideration for businesses looking to retain customers and grow brand loyalty.
Günther Vogelpoel is the CEO of Recharge.com. Offering branded payments from over 750 brands in one marketplace, Recharge.com is the go-to online store for digital prepaid credit for consumers who want to send or buy mobile top-ups, gift entertainment subscription cards to a loved one or themselves, or charge a prepaid credit card.