Prepaid cards are one of the top payment methods, and their popularity is only expected to grow in the coming years. Once used mostly by the unbanked or the underbanked, prepaid card usage has expanded to include consumers from all walks of life, including those who have intentionally shied away from traditional banking.
Prepaid cards started off as a niche product but soon expanded to a multi-purpose card that can be used in a variety of ways. According to a joint report from Aite Group and the US Department of Commerce, retail purchase volume from prepaid cards exceeded the $200 million mark in 2014 alone. Competition among prepaid card issuers is growing, and consumers have been very responsive to new prepaid cards being introduced into the market.
It is anticipated that the global market for prepaid cards will be over $3 trillion by the year 2022. The outlook for prepaid cards is bright and we’ll explore some of the exciting things that are on the horizon for consumers, merchants, and card issuers.
More Features on the Horizon
In recent years, consumers have not only become more proactive about their finances, they have also become more concerned about the security of their personal data. Major data breaches have put consumers on edge. As a result, prepaid card issuers are taking security seriously by implementing new technology.
One of the major technological changes to come to prepaid cards is Europay, MasterCard, and Visa EMV chips. These embedded chips can be used at compatible payment terminals and are much more secure than outdated magnetic stripe technology. At present, only about 25 percent of the more than 12 million card terminals are EMV compatible, but this number is steadily increasing.
EMV chips are also useful for facilitating contactless payments. Consumers have responded positively to the ability to pay quickly and easily without ever having to take their card out of their wallet. Contactless payments are not only fast, they also help reduce the likelihood of card loss or theft.
Increased Use of Prepaid Cards for Payroll
Not only are consumers enjoying the benefits offered by prepaid debit cards, employers are as well. Many employers have started using prepaid cards to manage payroll, and increased functionality on the horizon may bring even more businesses on board.
Prepaid payroll cards are expected to expand beyond their main use as a means of direct deposit. Previously, payroll cards were only able to be loaded by the employer. However, new functionality will allow card users the option to reload their payroll debit cards themselves. Employees will have the option to reload their cards at thousands of locations nationwide, get payroll deposited from multiple sources, and even receive benefits like child support, all on the same card.
However, the benefits don’t stop with employees. Employers will also benefit from more advanced prepaid card features. One of the top features is encryption, which will help facilitate timely deposits and will help streamline the employer’s bookkeeping. This increased speed and efficiency will decrease the burden on HR, resulting in fewer lost payments or delayed deposits.
More Consumer-Focused Features
Consumers who prefer prepaid debit cards already know some of the main benefits. From better money management to more financial control when traveling, prepaid cards offer the same convenience as traditional debit cards - without the hassle and risk of overdrafts. Cardholders of all age groups benefit from these features, and according to a study compiled by Phoenix Marketing International, cardholders of varying income levels and ages believe prepaid cards are a helpful money management tool.
Millennials, in particular, have truly embraced prepaid debit cards and see these products as their card of choice for many reasons. In fact, the Federal Reserve Bank of Philadelphia completed a study that found that the majority of prepaid card users are high-earning Millennials. This dispels the long-held myth that only low-income, unbanked individuals use prepaid cards.
In the past, online retailers have been slow to implement the acceptance of prepaid cards for payment, but this seems to be changing. For example, card issuers are implementing security features that will reduce online shopping fraud. By default, online transactions can be completed without the physical presence of a card. Since traditional debit cards are linked to a bank account, if a hacker gains access, consumers risk having their entire account drained.
Prepaid debit cards, on the other hand, limit the consumer’s exposure to hacks and are still backed by the zero liability benefits afforded to traditional bank debit cards. Both online and brick-and-mortar merchants are seeing the advantages in accepting prepaid cards for payment. It’s expected that this acceptance will grow substantially in the coming years.
The financial landscape is changing in the world and prepaid debit cards are changing right along with it. In the long term, prepaid cards will continue to gain popularity and will provide the same level of convenience and rewards as major credit cards and bank-issued debit cards. Exciting changes are on the horizon that will not only help consumers, but merchants as well.
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