EFT Margins
1
Growth in pre-paid cards brings
new opportunities
The use of pre-paid cards is growing rapidly worldwide. Although
pre-paid cards could be placed in the same category as debit or credit
cards, they are more likely to be used to replace cash, cheques or
vouchers, providing benefits such as convenience, cost effectiveness and
security. The growing acceptance of pre-paid cards among governments,
businesses and consumers presents an opportunity for banks, alongside
the major card networks, to identify new segments of the market that
can benefit from the pre-paid format.
It is difficult to generalise about pre-paid cards, because their potential
uses are so varied. Different business drivers and uses are emerging in
different parts of the world, but these can broadly be categorised as:
• Consumer initiated — Cards that people purchase for their
own use or the use of others, including public transport, road
tolls and parking, gift cards or youth spending cards. Pre-paid
mobile accounts also fall into this category;
• Business initiated — Usually payroll cards that act as a
replacement for cash and cheques, particularly for employees
without bank accounts. Expense accounts, bonuses and
corporate gifts can also work in a pre-paid card format;
• Government initiated — To reduce opportunities for fraud
and to streamline the issuance of benefits, many governments
are starting to issue pre-paid cards.
Pre-paid cards can be either for single use, as is often the case with gift
cards, or re-loadable. A further distinction can be made between pre-
paid cards that operate in a closed environment and those that are open.
Closed environment cards are those such as gift, or stored value cards
that can only be redeemed in a particular store, or transport cards that
are used for a sole purpose. Those that operate in an open environment
are linked into the major card networks and so can be used
for purchases or cash withdrawals at ATMs and points of sale. In this
way, they operate as a ki