European pre-paid market poised for growth - First Data

27 November 2009 | 9537 views | 2 credit card

The pre-paid card market is set to see significant growth in the UK, Austria, Germany and Italy over the next 12 months as people look to control their spending, according to research from First Data.

The vendor, which commissioned Auriemma Consulting to poll over 500 people in each country, says there is increasing awareness of, and interest in, gift, general spending, travel, youth and remittance pre-paid cards.

Germany and Austria are considered to be embryonic pre-paid markets, the UK slightly more established and Italy the most advanced in Europe.

In Italy 66% of respondents have purchased a pre-paid card in the last 12 months and 73% expect to over the next year. In the UK only 21% have bought one in the last year but three times as many - 63% - expect to over the next 12 months.

In Germany and Austria around a quarter have acquired a pre-paid card in the last year, with nearly half planning to buy one in the next 12 months.

Of all respondents, 55% see benefit in using a pre-paid card to help control spending and manage their money. However, the survey shows the cards do not only appeal to those on lower incomes without bank accounts - 57% of those who expect to buy a pre-paid card within the next 12 months describe themselves as creditworthy consumers with incomes above EUR40,000.

There are differences between countries in the way customers want to buy pre-paid cards. In Germany, banks are the preferred purchase channel for all types except gift cards. In the UK, three quarters of respondents cite supermarkets as the preferred distribution channel for all except travel cards. In Italy, the majority of consumers surveyed would look to purchase pre-paid cards at a post office, which already dominates the market.

Around two thirds want to receive information about pre-paid offerings through online media and 46% would like to be able to purchase gift cards via the Web.

The survey also shows that over a third of people would be willing to pay additional fees in order to personalise a prepaid gift card with a customised colour scheme, picture or message, offering a potentially lucrative option for banks and retailers.

Lisa Walker, head, pre-paid, First Data, international business, says: "There is an important opportunity for financial institutions to use their compliance and regulatory expertise in this area and partner with retailers who offer value through their brand and as a load and distribution channel. Whilst consumers are looking to the Internet to learn more about prepaid cards, online channels should currently only be regarded as a supplement to bricks and mortar outlets."

Comments: (2)

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Aashish Sharma - Emotion Associates - London | 01 December, 2009, 04:20

I would tend to disagree with the last comment about online channels merely being an educational channel for prepaid card knowledge and "bricks and mortar outlets" being the focus.

Whilst this may be true for certain european countries where Internet Access and the concept of the web itself and its reach is still growng, in developed markets such as the UK, Internet sales rival those of offline channels and in many cases far exceed offline sales.

Gift cards tend to be the exception but this is definitely true of open loop scheme branded prepaid cards.

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William Lorenz - EntroPay - London | 08 December, 2009, 11:55

The First Data survey findings signify a further step change in the move away from traditional payment methods. Whilst the demise of physical cash isn't going to happen overnight, the technology involved in making cash-free payments has advanced significantly, with pre-paid technology coming to the fore in Europe. Although the First Direct survey findings primarily focus on consumer appetite for pre-paid, there is also a strong call to action for businesses and banks, and in agreement with Aashish Sharma, this is especially prevalent in the online arena.

As the online market continues to grow, virtual prepay enables not only consumers but also busineses to avoid the costs traditionally associated with plastic cards and distribution. For example, consumers can cost-effectively send payments to businesses around the world, whilst also benefiting from protection against ID theft and fraud, which have become a cause for concern for many when purchasing online.

Virtual prepaid solutions also offer a highly secure alternative to credit or debit cards for banks. UK banks are liable for any losses to a customer's bank account resulting from fraudulent activity, which is especially rife in the online arena. By adopting prepaid, this risk exposure can be lessened, posing an attractive prospect for banks in today's market environment. In addition, the competition between retail banks and Payment Institutions, as a result of the PSD coming into fore last month, will further drive the need for retail banks to consider more innovative services and solutions in order to maintain their competitive position.

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