For lots of us, prepaid cards are synonymous with gift cards. But, that’s like saying the internet is limited to online shopping.
These easy-to-use cards have skyrocketed in popularity—with open-loop prepaid card transactions more than quadrupling since 2009—because of their extreme versatility. And mobile technology is adding to the opportunity.
Prepaid cards allow people, businesses and governments to use and distribute preloaded funds when they need them, wherever they need them – in store, in-app or online. In fact, two-thirds of consumers surveyed in Austria, Italy, the U.K. and Germany say they buy prepaid cards for themselves rather than as gifts, according to Auriemma Consulting Group.
Digital prepaid cards—where the card itself takes backseat—hold tremendous potential as well. This latest innovation stands to make gifting easier and plastic-less while making distribution as easy as the press of a button, enabling seamless paying through m-Commerce, e-Commerce and contactless terminals in-store.
By having funds loaded in advance of their purchase, prepaid cardholders—whether they have a bank account or not—are able to enjoy the security and convenience of electronic payments. As with other cards, prepaid can be used to pay retailers, send or receive money, pay bills, withdraw cash, and make purchases in person, by phone or over the Internet.
The prepaid model benefits myriad use cases, including:
Businesses looking to pay their employees efficiently. Walmart, for example, saves 50,000-plus pounds of paper annually in the U.S. alone by shifting from paper checks to payroll cards.
Gift givers seeking a universally accepted present.
Governments and non-governmental organizations looking to efficiently deliver social benefits, humanitarian aid and disbursements or streamline payments like transit cards;
Travelers seeking peace of mind on the road, eliminating the risk of carrying large amounts of cash;
Budget-conscious consumers looking to segment their funds and better manage spend.
Prepaid cards work alongside other financial tools, and continue to evolve. They have emerged as a critical payment tool for the 2 billion unbanked adults around the world, yet are also increasingly popular among banked consumers.
According to the Federal Reserve, 90% of prepaid card holders have access to a checking account in the U.S., the largest prepaid market today with $228 billion in prepaid card volume. In addition, U.S. prepaid card ownership is highest among millennials and growing the fastest among households with more than $50,000 in household income.
With so many applications, and supporters across demographics, prepaid cards will continue to deliver smart payments to more people in more places for many, many years.