Prepaid Is A Platform For Canadian FinTech Innovation
More than just a “pay-before card,” prepaid is a payment solution that serves as a platform for Canadian FinTech innovation.
Growth of FinTech investments in Canada has surpassed $750 million a year, according to research by KPGM, and prepaid sits at the very heart of the growing Canadian FinTech market. Thanks to its flexible and light infrastructure, prepaid has become the go-to solution for many FinTech developers looking to produce innovative products in order to change the financial landscape and challenge the status quo enjoyed by Canada’s big banks.
Convenience, ease-of-use, security, and the rise of technology-driven products and services are all contributing factors to the rapid growth of prepaid solutions. In 2018, close to $4.5 billion was loaded onto open-loop prepaid products in Canada, according to reports from the Canadian Prepaid Providers Organization (CPPO). Consumers, businesses, and government agencies are all turning to prepaid, thanks to its ability to streamline purchases, payments, incentives, disbursements, and more.
Just how exactly is prepaid innovating the Canadian FinTech industry?
1. Prepaid Is Killing The Cheque
If we’ve told you once, we’ve told you a thousand times–cheques are expensive! According to research by Deloitte, the total cost to the economy for all the cheques Canada cuts each year is $5.8 billion. Prepaid is not only significantly cheaper–an electronic payment costs less than a dollar–it also offers a plethora of other advantages over both cheques and alternative cashless transactions. Combining the benefits of old-world cheques with new-age digital payments, prepaid is a secure, traceable, and auditable form of payment that is reliable and fast. With more than 550 million Canadian cheques produced each year by businesses and government agencies, there is a large, untouched market opportunity in Canada for emerging payments like prepaid.
2. Prepaid Is A Bonafide Budgeting Tool
It’s no secret—it’s expensive to live in big cities such as Toronto, Vancouver, and Edmonton. Debt levels continue to rise in Canada as more and more Canadians see the balances on their credit cards and lines of credit going up. And yet, consumers are also turning away from cash payments–according to a December 2018 report from Payments Canada, the value of cash transactions has decreased by more than 20% since 2012. Prepaid payments do away with costly transaction fees, accrue no additional debt, and allow customers to make online and in-app purchases. Prepaid programs also provide controls that can limit spending, including on the types of items purchased by a cardholder, making it a great budgeting tool.
3. Prepaid Is Great For the Gig Economy
According to PYMNTS’ 2018 Gig Economy Index, over 33% of workers have participated in the gig economy. Experts predict that by 2020, 40% of all workers will be independent, up from 34% in 2016, and by 2028, freelancers will make up more than half of the entire workforce. However, despite gig work being on-demand, only 17% of gig platforms pay in real-time. 29% of gig workers reported problems with not getting paid for their work, while 27% reported being paid late.
62% of Canadians say they would feel more loyal to a company that pays them in real-time. 85% of those surveyed would take on more gig work if they were paid faster. Prepaid solutions are beneficial to both workers and businesses in the gig economy. It offers businesses a competitive advantage in retaining and acquiring workers thanks to the ability to offer instantaneous payments, and it can help managers, accountants, and worker crews better track and reconcile expenses. Prepaid can also protect gig workers from having to pay out-of-pocket for work-related expenses.
4. Prepaid Improves Financial Literacy & Inclusion
90% of eligible Canadian have a bank account, but many rural and remote communities have very limited financial options due to economic, technological, and geographic barriers. Cheque-cashing fees can cost 1-5% of a total cheque’s value, and NSF and overdraft fees can quickly eat away at a person’s finances. Prepaid provides a gateway for underbanked Canadians to have convenient and affordable access to their finances. Funds are instantly loaded onto cards and can be accessed as needed to make quick and secure payments throughout the country, in real-time. Cards can be used anywhere Visa® is accepted worldwide, including online or via phone, and cash can be withdrawn from ATMs.
Prepaid Solutions Is An Important Platform for the Growth of Canadian FinTech
The future looks bright for prepaid solutions as more and more Canadian are discovering the numerous advantages of using physical or virtual open-loop cards. The next decade with continue to see the growth of innovative and disruptive financial services and products, and prepaid will be a driving force behind the development of the Canadian FinTech space.
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