Prepaid cards have continued to gain popularity since they began to rise to the fore in the late 1990s and early 2000s. No longer only used by the unbanked or those with poor credit, prepaid cards are gaining favor among people of all ages and income levels.
A report compiled by Allied Market Research indicated that the global prepaid card market is expected to exceed $3 trillion by the year 2022, representing a 27 percent increase from current levels. In addition, the prepaid card market is expected to expand even further and have an even greater impact in both Europe and Asia. The reasons cited for this rapid growth include more awareness of prepaid card benefits, increased acceptance in retail settings, and a higher demand from consumers for alternative financial solutions.
Prepaid cards are favored by the public because they meet the needs of individuals, but businesses have started to enjoy the benefits as well. According to the Federal Deposit Insurance Corporation (FDIC), more than $100 billion is expected to be loaded onto prepaid cards in the coming year. Here, we’ll explore some of the biggest trends on the horizon for the prepaid card industry and how these change will affect various sectors going forward.
1. Payroll Cards to Become More Prevalent
For businesses, especially small businesses, payroll can be rather complicated. From direct deposit to paper checks, there are a plethora of options for paying employees and all of them have both benefits and drawbacks. Recently, however, many employers have turned to using prepaid debit cards as a means to distribute payroll.
Prepaid payroll debit cards have seen a steady increase in use, and this trend is expected to continue well into 2018. Employers find it easy to transition employees to prepaid payroll cards for a number of reasons. One, for hourly or temporary employees, using payroll cards eliminates problems such as long bank hold times or the need to wait multiple payroll cycles for direct deposit to start. Additionally, using prepaid payroll cards eliminates the need for paper checks. This saves on check printing costs and helps employees avoid having to cash their checks and potentially pay extra fees to do so.
Payroll debit cards have effectively helped certain employers save up to hundreds of dollars per employee. Some estimates indicate that approximately 11 million employees were paid via prepaid payroll card in 2017 alone. Prepaid payroll cards also benefit taxpayers because they help prevent the issues associated with lost or stolen checks, a problem that the government spends about $50 million a year to investigate.
2. Enhanced Security Features
Another trend on the horizon for prepaid cards is enhanced security features. With technology moving at a rapid pace, new security technology continues to be implemented. Prepaid cards are expected to be a part of this evolution.
In the coming years, prepaid card issuers are expected to place greater emphasis on security and fraud detection features. In light of the multitude of data breaches that have occurred, card issuers are taking security more seriously in an effort to protect consumers and retailers.
Consumers have also become more aware of their finances. They understand how fraud can sabotage their efforts, and prepaid cards are now favored by vigilant consumers. The use of a prepaid card is limited to the amount of money loaded onto the card. This means that they are inherently more secure than traditional debit cards, which allow a consumer’s account to be overdrawn, or credit cards that could potentially be charged to their limit before the consumer even notices his or her card is missing.
3. An Increased Focus on Business Users
In addition to using prepaid cards to streamline payroll processes, many businesses are expected to increase their use of prepaid cards for managing corporate expense accounts. In the past, companies routinely issued credit cards to employees for travel, marketing, and other expenses. While credit cards were generally an acceptable way to manage expenses, they also came with their share of problems.
Many businesses have begun to transition to prepaid debit cards and more are expected to follow suit. Prepaid debit cards are more cost-effective and offer greater flexibility as compared to credit cards. Companies are also able to load a predetermined amount onto cards, which can be immediately accessed by employees.
In addition, prepaid cards can limit the risk associated with issuing credit cards to employees. This is because with prepaid cards, there is no direct access to corporate accounts. Not only that, prepaid cards can be issued to employees with varying levels of security clearance. As with other options, prepaid cards can be tied to record-keeping systems, so fiscal officers can see exactly how allocated funds are spent.
As the market for prepaid debit cards continues to expand, businesses will look to integrate them into their business models and consumers will continue to use them in place of cash and checking accounts.
In 2018 and beyond, we can expect to see technological innovations that will undoubtedly impact the use of prepaid cards. Business owners will benefit not only by offering payroll cards to their employees, but also by integrating prepaid acceptance into their arsenal of available payment methods for customers.
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