Pre-paid card use to soar in Europe, boosted by Sepa

Pre-paid card use to soar in Europe, boosted by Sepa

Around 375 million stored-value cards will be in circulation in Europe by 2010 - a 1000% increase over 2005 - while pre-paid card usage will rise 600% to EUR75bn, says market analysts TowerGroup, as banks seek new ways of driving profits following the introduction of the Single Euro Payments Area (Sepa).

TowerGroup says banks across Europe, beyond the eurozone, stand to lose over EUR40bn following Sepa, mainly through the loss of cross-border payment fees.

As banks seek to cut costs and drive profits in a post-Sepa environment, they will be forced to find new ways to motivate customers to use low-cost payment instruments, such as credit, debit, and charge cards, rather than high-cost instruments such as cheques.

Unlike chip-based credit and debit cards, stored value cards provide a direct substitute for today's cash and cheques as they can be used by customers that do not have a bank account and can be as "anonymous" as cash for online and offline payments.

Ralph Silva senior analyst, European banking and payments, TowerGroup, and author of the report, says pre-paid cards give Europe's banks an ideal mechanism to achieve efficiencies post-Sepa and the sharp rise in the deployment of stored value products over the next 10 years will be key to supporting bank profitability.

European banks will target specific areas, such as gift cards for the youth markets and corporate benefits programmes, due to the value and volume of payments, says Silva.

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