Consumers have embraced prepaid debit cards and for good reason. From effortless money management and convenient reloading options to simpler person-to-person payments, prepaid cards are no longer just reserved for the unbanked or underbanked consumer.
More retailers have also started to accept prepaid debit cards. They have come to understand that millions of consumers love prepaid debit cards and plan to continue using them to pay for everyday items.
Prepaid debit cards have shown significant growth in the past decade and there is no indication that the momentum is slowing down. These popular cards are used by consumers of all ages. According to a study conducted by global merchant services company, First Data, Millennials in particular have embraced the idea of prepaid cards.
The prepaid card market includes single-use prepaid debit cards, gift cards, government disbursement cards, and the most widely-used product: prepaid debit cards. It is anticipated that the prepaid card market as a whole will reach $3.1 trillion by the year 2022, according to an Infosys white paper.
What does this growth mean for the average consumer? The rapid growth of these cards will undoubtedly bring some exciting changes in the coming year. Let’s take a look at what’s on the horizon for prepaid debit cards.
Virtual Cards
Digital payments are fairly new to the marketplace and are expected to expand even more going forward. Virtual cards are essentially debit cards that are intended solely for online use. These handy prepaid cards are ideal for online shopping. According to a PayPal 2017 study entitled Digital Payments: Thinking beyond Transactions, there is significant room for growth in this area.
More Security Features
One of the main reasons people love prepaid cards is the high level of security when compared to traditional, bank-issued debit cards. Since traditional cards are linked to a checking account, the risk of fraud is higher. If the card is lost or stolen, funds can be depleted. Prepaid cards, on the other hand, serve as a safer alternative to cash but with none of the risks of a traditional debit card.
Overall, the banking industry has worked to improve security and reduce fraud. This is apparent in the gradual phasing out of magnetic stripe cards in favor of EMV (Europay, MasterCard, and Visa) chip cards. Most major prepaid card issuers have also started to convert their cards to use EMV chips for added security.
The cost of replacing magnetic stripe cards with chip cards has decreased dramatically. While some prepaid card issuers absorb the cost, others do not. However, consumers have expressed willingness to pay a small fee in exchange for the improved security of EMV chip cards.
Improved Digital Payments
It is believed that the future of prepaid cards is tied to how effectively they can be used for digital transactions. From buying and selling cryptocurrency to person-to-person payments, acceptance of prepaid debit cards is becoming more commonplace.
Consumers have expressed interest in the ability to link prepaid debit cards to popular peer-to-peer payment networks. For example, Apple has incorporated prepaid cards into its virtual payment platform, Apply Pay Cash.
Another area that will see increased growth is contactless payments. Traditionally, prepaid debit cards and contactless cards have existed independently of each other. In the coming years, it is expected that these two will be used simultaneously for faster and more secure transactions.
The Bright Future of Prepaid Debit Cards
There is a noticeable shift occurring in the financial industry. Consumers have made it clear that they believe prepaid cards are a safer and more convenient alternative to debit cards linked to checking accounts.
As people become more financially aware, they are also shying away from high-interest credit cards. Instead, they are opting to rely on the ease and convenience of spending only what is available in their prepaid debit cards.
Overall, the prepaid industry has made significant progress in recent years, and there is no sign of it slowing down. From new payment technology to improved security, prepaid debit cards will continue to be the go-to option for consumers of all ages and backgrounds.
As prepaid cards are accepted in the in more physical and online locations, growth over the next few years is expected to be astounding. To continue this unprecedented momentum, prepaid card issuers should be prepared to embrace technology and work to gain an keep the interest of consumers.
