Future Trends: New Market Opportunities for Electronic Payments
As the prepaid industry continues to grow, near-term, new-market opportunities will come from all three major sectors–direct-to-consumer, commercial, and government programs—as well as from the development of new technologies that will require payments.
In the direct-to-consumer space, prepaid cards will provide tools for consumers who want to manage their budgets and protect their privacy or isolate funds from other payment accounts. As online card-not-present fraud grows, hacks get more prevalent, and identity theft continues, some shoppers will want to limit their exposure. Although consumers know that zero-liability policies limit their financial losses in the event of a hack, they still don’t like the feeling that their accounts have been accessed by criminals. In addition, they still must go through the process of closing one account and opening a new one, getting a new card, and making sure the attack was limited to a single transaction. Prepaid cards—both physical and virtual—can provide ways to limit a shopper’s exposure.
Prepaid can also help to limit an issuer’s exposure in the event of a hack, since only the funds on the card are at risk, not an entire credit line or deposit account. While there are still some issues with merchant acceptance of prepaid online, such as being able to do split tender transactions with more than one form of open-loop payment, prepaid may provide one way to manage risk in the new fraud environment, while cross-selling a new companion card to existing account holders.
In the same way that prepaid can be used to limit risk on the consumer side, it can also be used to limit risk on the commercial side. Companies that want to provide funds for employees or contractors, without extending credit or granting access to company accounts, can make use of prepaid cards to do so. They also can attach those cards to record-keeping systems and, in some cases, even filter where those cards can be used.
Government programs also will find uses for prepaid cards in the future. Many government benefits programs still issue cheques. Converting them to electronic payments likely will involve prepaid cards because of the ease of issuing the cards and the ability to control spend, while providing good funds. The use of prepaid cards will continue to grow in this category as cards are put to use for things like distributing benefits and for government-sponsored programs, like transit and tolls, where guaranteed good funds are strongly desired.
New technology will also open opportunities for prepaid programs. They led the way and continue to dominate mobile payments, especially on the open-loop side. Prepaid will find a place in the internet of things and a possible resurgence of wearables.
Currently, connected devices that make payments operate on a prepaid basis. Connected devices, like toll transponders and smart utility meters, can be connected to credit and debit accounts, but they rely on those accounts for continuous reloading. It is likely that smart vehicles and smart appliances will also use prepaid cards as a way to limit exposure for both the users and the merchants.
Have questions or looking to learn more about prepaid cards? Feel free to contact us by visiting our contact page. DCR offers years of experience and expertise in prepaid card program—from the launching stage all the way through fulfillment and program management.