We have 3 types of payment cards
1) Pay before (Prepaid)
2) Pay Now (Debit)
3) Pay After. (Credit)
Debit and Credit cards have a long history – but it seems that the Prepaid Card is some kind invention – but is it really that – or is it just “old wine” in a new bottle (not to says that old wine is not good)
Pay Before – prepaid cards – are cards that you are going to pay into before you can use them. A simple form of this principle is a 10 rides card to a bus network or a rollercoaster. You buy 10 tickets and every time you take a ride, they stamp your card
– my greath grand father used this in his busses in Denmark even before the second world war. The new thing about these prepaid products, is that we are using the infrastructure of the debit/credit card schemes.
Even so we call it “pre-paid card” is it not necessary a card – it can also be some kind of virtual account – or even a cell-phone account.
You can divide the “pre-paid” cards after where the value information is stored.:
a) STORED AT THE CARD – maybe on a chip – and maybe reloadable – either in an automate or at a counter. A typical use for those could be for commuter-rides, laundry, photocopy, and other small ticket purchase. They can be branded of one of the card
schemes – or they can be private label (e.g. Jacob’s laundry service). If you lose the card, you have typically lost the value on the card – on the other hand –when the information is stored at the card, a transactions can be completed in a second.
b) STORED ON A CENTRAL COMPUTER - just like a PAY NOW card (Debit). You would typical buy this “card”, load it with a certain amount of money (e.g. 100 EUR), and every time I use it, the money will be withdrawn from my central account. They could
be branded Visa/MasterCard/ Amex
This could be used for a lot of things – like gift-cards, card to underage teenagers – use it on vacation (don’t bring you Platinum MasterCard on the beach, but load 100 EUR on a prepaid card, and use it at the beach bar) – it could be used in countries
where people don’t have bank accounts, but need the benefits of have a card – it could be used to buy things on the internet (e.g. subscriptions where you will be sure you can cancel it later.) It could also be used in the corporate segment, where you can
give your employee with a card of e.g. 100 EUR to pay for taxi, parking etc. but since the card is prepaid, you know that he is not going to buy a new Rolex with it.
It is also the way many cell phones are used – you pay a certain amount into your account, and you can use it to buy minutes, messages, ringtones – and in some cases also physical things. I think it is in Kenya (or maybe Uganda) – where it is possible to
put money into the phone card – and get in back later – meaning that a large part of the population uses it as a deposit account – in a country where only a very small part of the population has bank accounts.
c) STORED BOTH CENTRALLY AND AT THE CARD – gives you the speed of the local value storing – but also the ability to “load the card on the internet” – cancel the card if lost. Can be practical in e.g. mass transit – where speed is essential (it is
a large difference in rush hour in the New York / New Jersey Metro (PATH) – if it takes ½ a second or 2½ seconds to validate if a card is valid). So I guess their valued are stored on the card – but if I have register my card online, I can get a new commuter
card, if I loses the other).
To answer my question – no pre-paid product is nothing new – but the new technology we can use around the prepaid cards, gives us here in 2009 some possibilities to develop new and interesting payment product. Both in the developed world but also in a world
where the technological infrastructure is at a lower level.