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There are real opportunities for banks in the prepaid cards market, according to U.S-based consultancy Edgar, Dunn & Company (EDC). But banks need to watch out that they are not left behind by non-bank providers of prepaid products.
In a presentation to VRL KnowledgeBank’s Cards & Payments Asia-Pacific 2007 conference in Hong Kong, EDC director Ken Howes said that prepaid offers significant potential for cash substitution, either through a prepaid facility on existing debit cards or through discrete prepaid products.
The US has led the way in the prepaid market, according to Howe, and Asian banks are more active in the prepaid space than banks in Europe. Non-bank organizations in Asia have focused on developing prepaid solutions for the mass transit sector using new technologies such as smart cards and contactless readers.
“Non-bank organizations in Europe have been more innovative with prepaid than retail banks, targeting different consumer segments through various channels,” Howes said. The dominant position of non-banks in the prepaid market is already raising the question of potential disintermediation of banks, he warned.
Howes said that there is a major opportunity for banks to form partnerships with specialist prepaid providers, for example telecoms companies, merchants, utilities and government agencies. ATMs and bank branch networks provide important reload and money transfer opportunities for prepaid products, he added.
Even if banks do not issue their own proprietary prepaid cards, they can still play a role in key areas of the prepaid value chain, Howes said. For example, Visa and MasterCard can supply network services, while acquirers can offer prepaid transaction clearing and settlement, and banks can supply card issuance and management facilities to prepaid companies.
