Imagine yourself in ten years time. Look back at how payments has evolved. What will be the stand-out change? What platform has made the difference? We think prepaid cards are on course to have a massive impact.
Back to today, prepaid, or e-money, has formed the backbone of a number of innovative and disruptive solutions.
These have often come from smaller, alternative players to the larger banks we associate with mainstream debit and credit cards. Prepaid is an industry where the entry criteria for participation is intentionally more accessible and has therefore seen a wide range of new, lean and agile providers set up and enter.
A card for specific circumstances
The nature of prepaid has meant it fits very well to specific payment characteristics – for example those looking to control risk, deliver absolute balance control or simply deliver a standalone payment scheme product to any customer. It’s this ability that has led to segmented payment products that address specific customer needs – often with a disruptive solution that is typically cheaper, faster and more customer focussed than the incumbent. Even the ‘classic’ prepaid example of Poste Italiane – one of the world’s largest prepaid programmes – was originally designed to address very specific payment needs – a card available to all, cheaply, that can be used on the internet – addressing the specific problem that the domestic debit scheme could not be used online and that not everyone could get a credit card.
Currency cards have used a similar model to address a specific segment of payments with an alternative solution – offering a control and security and the convenience of a fixed upfront exchange rate without all the downsides of carrying large amounts of cash. This, coupled with the attractiveness of a market with higher margins than domestic payments has led to an explosion of new travel products and the associated characteristics of a competitive, embryonic market – aggressive pricing, rapid innovation and significant marketing investment as providers jostle for position.
And it is these classic signs of disruption – lower margins, specific customer targeting and a simple customer proposition – that have generally underlined the role of prepaid in payments.
A platform for digital growth
As the digital revolution accelerates, prepaid has become the preferred platform for new payments innovation. bPay is a wearablesolution from Barclaycard that delivers contactless payment functionality into the convenience of a wristband, fob or sticker. And being prepaid it’s available to all. But whilst prepaid delivers the ability for Barclaycard to offer a product to a wider customer base, it’s the contactless convenience delivered through a new and fun form factor that is the customer proposition here.
So as prepaid evolves to become less of product ‘type’ and more of a platform for delivery, we begin to see more complex products emerge that look to address a wider portion of customers financial requirements. ‘Banking Lite’ products, such as Ffrees, offer a credible alternative to a bank account from a mainstream bank , evolving the General Purpose Cards of years before to a full service banking proposition. Here the acceptance criteria certainly lend meaningful weight to the proposition, but it is the added functionality, such as control features, flexible product options and a plain speaking and transparent approach that attract customers to consider banking with one of these emerging providers.
Holding its own
In other words, prepaid is not a compromise. It is a credible, real alternative to the traditional way we have structured our financial services products. Perhaps now we are entering a world of ‘Prepaid Natives’. Customers who have grown up with both traditional banking and e-money and do not consider prepaid as a concession but judge every product based on its individual merits.