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Lots of Excitement about International Prepaid, but Confusion Abounds

By Terry X Xie
March 21, 2011
in Mercator Insights
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Alternative Lending: The Grass is Always Greener on the Other Side of the Fence - PaymentsJournal

During the Prepaid Expo show last week inOrlando, FL, the Wednesday theme of the conference wasinternational prepaid. We had Wal-Mart sharing their experience ofexpanding their gift card programs around the world, First Datadiscussing a variety of issues that might arise overseas, andItzCash holding a panel discussion about the Indian prepaid market-in addition to the release of preliminary results from theMercator Global Prepaid Market Study, among other highlights.

The global prepaid markets have become an increasingly hot topicespecially over the past two years. As the US market matures andbecomes crowded, both large incumbent and small emerging playersare looking for additional opportunities to maintain sustainablegrowth over a longer term (or for ways to expand their customerbase). At the same time, prepaid cards are growing quickly overseasincluding many of the large emerging markets where consumers andmerchants traditionally have been slow to accept electronicpayments. And prepaid industries in those markets are hungry forinput including capital, technologies, lessons, and expertise frommore advanced markets.

There have been efforts in the industry to map the global prepaidcard markets to different degrees of success. Two main reasons.First, prepaid cards are relatively new in many markets and areevolving quickly, making it difficult even for people in theindustry to have a full understanding of what is happening; andthere are little or no official stats for prepaid cards (unlikecredit and debit cards). Secondly, there is no well-defined andcommonly accepted definition of prepaid cards around the world, sowhen people from different countries talk about prepaid markets andopportunities, more likely than not that they are talking aboutdifferent things, with different assumptions and mindsets regardingprepaid cards. This also significantly adds to the difficulties ofunderstanding the global prepaid market.

What Mercator has been working over the last two years (and what Ipresented at Prepaid Expo) is a definition and framework for globalprepaid market study aiming to solve at least some of the issues.The definition and framework have been adapted and revised fromwhat we have been using in our industry-leading US market coverageto fit in the international context. The categories and segmentscurrently included in our study include:

• Business Time & Expense
– Employee/Partner Incentives
– Consumer Incentives
• Campus
• Cash Access
– Travel
– Open Money / Financial Services
– Gift
– Remittance/P2P
• Government
– Social Security and Protection
• Payroll & Benefits
– Payroll
– Benefits
• Petroleum
• Store Cards (Gift Cards)
– In-Store Sales
• Telecom
– Prepaid Mobile
• Transportation
– Urban Public Transit
• Petroleum

Other categories under consideration for future inclusion includeDigital Content/Online Gaming, Highway Tolls (EDC), and PrepaidUtilities, among others.

Based on the definition and framework, Mercator carried out aglobal study that evaluated market potential for prepaid cards inover 10 categories and 15 segments. Preliminary results from thisyear’s study (including the world’s top 30 markets and the totalprepaid potential they represent), top segments in each of thesemarkets, as well as top markets for major prepaid segments, werepresented to the conference attendees. Judging from the responsesand requests for more information that we received, there iscertainly a lot of interest from different places around theworld.

Interested in more information? Having thoughts and comments toshare? Please send us an e-mail at the link below!

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