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Pre-paid cards tipped for growth in Europe

11 August 2006  |  14143 views  |  0 credit card

European consumers are set to spend EUR75 billion by 2010 using reloadable pre-paid cards, which are targeted at customers that do not have a bank account.

According to a report by European payment consultancy PSE Consulting, stored value cards are expected to account for 2.3 billion card transactions per annum by 2010 - compared with 150 million transactions now - representing five per cent of total card transaction volumes and three per cent of total card spending.

PSE says annual growth rates of the prepaid card market will exceed 110% for the next five years, and pre-paid gift products - such as card-based gift vouchers - will fuel a significant proportion (almost 30%) of total spend.

The use of the cards as an alternative to travellers cheques and foreign cash will also drive growth and account for 15% of spending. Internet payment cards (which provide a secure alternative to credit cards) are expected to generate 13% of spending, while company rewards and incentives programmes are set to account for 12% of spending.

But despite the anticipated rate of growth, Peter Jones, managing director of PSE, says banks must act quickly if they are to secure their share of the pre-paid market and compete with non-banks.

"We have forecast that 58% of spend will occur on Visa or MasterCard branded cards but, to date, banks and financial institutions have been adopting a 'wait and see' strategy," he says.

Jones says this is illustrated by Poste Italiane in Italy which currently has 1.9 million pre-paid cards in circulation.

The research found three separate segments are set to become the focus for pre-paid market development - stored value gift cards, direct financial institution offers including cards used for Internet payments, online gaming, travel cards or remittance products and business solutions such as cards for delivering government benefits and payroll.

As part of the research PSE carried out a mystery shopper survey using several different pre-paid travel products and those targeted at the un-banked which found that the registration of some products was very complex and may deter customers.

Chris Jones, senior consultant at PSE, says: "The sector must focus on developing and delivering simpler, cheaper products and services if the forecast levels of growth are to be achieved. The issues associated with directly charging consumers for pre-paid services mean corporate pre-paid solutions are likely to offer more attractive revenue models in the short term."

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