How prepaid cards can benefit your business
In a time of new alternative payment methods, prepaid cards remain an essential and enduring payment method. The benefits of prepaid cards are as vital and relevant as ever. Prepaid cards deliver concrete value for diverse sets of consumers, businesses, governments and financial institutions around the world.
How are prepaid cards surviving—and thriving—in a world flush with cutting-edge alternatives? Let’s take a closer look.
What are prepaid cards?
A prepaid card is a payment method that is funded in advance rather than tied to a savings, checking or credit account. Prepaid cards look and function much like credit and debit cards and are most often aligned with a major card brand network like American Express, Discover, Mastercard or Visa. Prepaid “cards” are used online and in-store and function as virtual accounts just like debit and credit cards.
Are prepaid cards popular?
Yes. Prepaid cards occupy a much smaller section of the overall payments pie than traditional credit cards or debit cards, but they’re far from a niche. In fact, prepaid cards are big business.
In a Mercator Advisory Group forecasts that open-loop prepaid cards in the US will be loaded with over $368 billion in 2019. The report projects 10% compound annual growth through 2021, when the prepaid card market in the US is expected to surpass $427 billion.
In , prepaid cards were estimated to represent 3% of all online (card-not-present) spending and 2% of all point of sale (card-present) spend in the US in 2017. Those small percentages are of very large pies: $7.9 trillion in-store and $824 billion in eCommerce.
Should my business accept prepaid cards?
For nearly every business the answer is a resounding yes.. For merchants, accepting prepaid cards is easy. There’s often no additional hardware or software required to accept prepaid credit cards since they’re usually issued by the major card brands. The process of accepting prepaid cards can be the same as taking a credit or debit card.
You may already be set up to accept prepaid cards. Consult with your payments provider to see just how easy you can tap into this vital payment method.
Are there different types of prepaid cards?
The lasting popularity of prepaid cards is due in large part to their versatility. Prepaid cards are used in a wide variety of contexts and settings, which often includes the following:
- Open-loop general purpose prepaid cards allow consumers to use prepaid cards almost identically to credit cards and debit cards with the exception of the pre-funding.
- Prepaid cards are widely used as instruments to deliver government benefits such as social security, unemployment or veteran’s benefits.
- Prepaid cards are widely used by businesses to compensate employees including payroll, bonuses and in the form of benefits such as health savings accounts (HSAs).
How do prepaid cards benefit consumers?
Prepaid cards are popular because of the many benefits they offer consumers:
- Less risk of overspending. Prepaid cards offer less risk of overspending than credit cards. It's easy to overspend with traditional payment cards. Many consumers prefer tools to guide them to better spending decisions. Prepaid cards limit spending to no more than the card balance.
- Safer than cash. Prepaid credit cards are safer to carry than cash, which make them great options for travelers. Quick and easy registration of prepaid cards protects consumers if the card is lost or stolen.
- Easy to use and reload. Though funding is different, prepaid cards work just like other credit and debit cards from the major card brand networks. Consumers can often reload their prepaid credit cards in a variety of ways, including via bank account transfers, direct deposit or cash—both online and in-person.
- An alternative to banks. In 2018 that 6.5% of US households were unbanked. That leaves 8.4 million US households that still need to operate in the economy without a checking or saving account. Prepaid cards offer unbanked consumers access to essential payment services.
- Secure alternative form of payment. For a variety of privacy and security reasons, some consumers are still wary of using their credit or debit cards in all situations. Prepaid cards keep offer a level of anonymity and protection of certain personally identifiable information and private account data.
How can prepaid cards benefit my business?
Worldpay is a leading provider of prepaid stored value card solutions that deliver everything your business need to generate new revenue, increase brand exposure and easily manage your card program.
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