The prepaid market is booming not just within the Indian borders but across the world. According to India Prepaid Cards Market Outlook, the market size is expected to grow at a CAGR of about 40.5 percent between 2021 and 2026 and is estimated to reach $340 billion by 2026. This can be attributed to the rising demand for cashless payments, proliferating e-commerce sector, higher adoption of AI & IoT, as well as the growing number of unbanked and underbanked population.
This article aims to elaborate on some of the trends influencing the path ahead for prepaid issuance:
Cards Set for a Virtual Makeover
Digital card issuance represents a substantive opportunity for financial institutions to differentiate themselves in the market and increase payment volumes. A recent report by Juniper Research indicates the value of transactions processed by virtual cards will treble over the next 5 years; increasing from an anticipated $1.6 trillion in 2020.
Propelled by developments such as open banking, an explosion in connected devices and touchpoints and consumerisation of payments, demand for virtual card solutions has spread across consumer segments and businesses.
With virtual issuance, financial institutions can instantly provision cards onto a connected device to enable secure access to funds to pay online, in-app, or in-store.
The use of virtual cards for online payments are beneficial in the following ways:
• Protects the credentials of the primary card and can
• Provide replacement for single and recurring use.
• Programmable spend controls help cardholders to limit usage to a certain number or value of transactions, a certain merchant, or a time limit on the purchase.
Capitalise on Deferred Payments
As flexible installment products take hold across the globe it presents an opportunity for issuers to tap into the growing e-commerce segment and access a large customer pool, especially among segments with low credit card penetration. Deferred payments has emerged as a new category of credit to help consumers finance new spending in-store or online.
It also helps merchants increase average online order value (in some cases up to 30 percent) and purchaser frequency reduces basket abandonment. Unlike traditional banks, which lend to existing customers, NBFCs and neo-age lenders or fintechs cater to young, low-income, digitally savvy customers who have small-ticket, short-term credit needs, with limited or no credit history.
In markets such as India, more than 50 percent of the volume share in small loans is $100. By partnering with merchants and embracing digital technologies, pay-later products compete directly with credit cards to provide customers with quick and easy short-term credit at checkout.
New Card Segments
Prepaid is discovering new niches and combinations that enhance people’s experiences of locations and events. The pandemic has accelerated the demand for contactless payments. According to Mastercard, 79 percent of people around the world are currently using contactless payments, and 74 percent will continue to use mobile payments after the pandemic subsides.
This strong adoption also paves the way for payments via wearables. Many banks are partnering with wearable manufacturers. Titan has partnered with the State Bank of India for the launch of a range of watches that makes use of Canada-based Tappy Tech’s wearable payments technology to let consumers make contactless transactions at POS terminals across India.
Apart from this, prepaid cards also help consumers by enabling real-time payments for services like Uber or spend money from the card with overdraft protection.
Even organisations pay their employees through prepaid cards. And it is amongst the most popular segment of prepaid cards. Issuers also offer open-loop cards to allow wages to be pushed to the cardholder’s account in real-time. They can also make the service more personalized by offering financial advice, overdraft warnings, and discounts at local stores.
Path to the future
COVID-19 has played a digital catalyst for the banking sector fastening the pace of tech adoption and progress. Customizing services is crucial in the future of banking and it is important that banks stay ahead of these trends and offer the best services to their consumers.
The author, Satish N, is Deputy Chief Product Officer at FSS. The views expressed are personal
(Edited by : Anshul)