Prepaid Card Market

Market Overview

The global prepaid card market size was valued at USD 3.41 trillion in 2022. It is expected to reach USD 19.78 trillion by 2031, growing at a CAGR of 19.3% during the forecast period (2023-2031).

Prepaid cards are an alternative to regular bank cards that let users spend up to the amount stored on the card. It is comparable to a debit card and may be used for the same things, including making purchases, paying bills online, paying for gas, shopping, and making regular payments, just like you would in a store. These prepaid cards are a type of GPR, or General-Purpose Reloadable Card, given to individuals who do not meet the requirements for a banking account or cannot pay the expenses associated with maintaining one. With both closed and open loop networks, these cards function. Due to the availability of innovative payment options, more and more transactions are now being conducted with cards rather than cash in the contemporary environment. These payment options have replaced conventional bank accounts and offer a fresh approach to money management.

Prepaid cards were initially intended to appeal to the unbanked and underbanked population, but they have also caught the interest of those who are banked. Prepaid cards have had a revolutionary impact on retail establishments, corporate institutions, and other businesses. Customers can now easily buy there within the access restrictions of their card, albeit the amount they can spend is capped at the pre-deposited amount. Future market growth is anticipated to be boosted by new prepaid card-related apps, increased consumer awareness of prepaid cards for use in various transactions, and rising use of these cards when traveling abroad. Prepaid card fees come in many forms, and they lack security features compared to credit or debit cards, which are significant market growth inhibitors.

Market Dynamics

Global Prepaid Card Market Drivers

The Demand for Cash Alternatives and Growth in Internet Users

According to numerous studies, advisors have seen a rise in client desire for cashless transactions as they seek low-risk investments with higher returns than conventional cash-based accounts. These prepaid cards reduce the possibility of overspending because they only allow purchases up to the card balance. Prepaid cards are an essential alternative for many applications since they allow for the ability to be loaded via different platforms in various methods, such as bank account transfers, direct deposits, or cash, online and in person.

Corporations are likewise concentrating on innovative currency substitutes to handle their regular activities. Card issuers give simple methods for making payments. For example, VA Tech Ventures created “Happay,” a new corporate expenditure card that managers may remotely administer via mobile or web interface. The employer can use this card to set limits, fund the card, track costs, and authorize expenses in real-time. All of these reasons are anticipated to stimulate prepaid card market expansion. Customers are now forced to use plastic money instead of storing hard currency in their pockets due to the e-commerce industry's explosive growth.

According to information from several institutions, the younger generation has been a significant force in the global shift away from credit cards for purchases. For instance, the payments sector in Dubai is undergoing substantial change as many customers choose to stop using their credit cards in favor of a new payment method called a “prepaid debit card” for online shopping, travel, or giving. These cards can be used as credit and debit card alternatives and are convenient for customers who do not have bank accounts. As a result, it is anticipated that prepaid cards will continue to dominate the electronic payment sector.

Global Prepaid Card Market Restraints

Inadequate Standardization

Prepaid card fees, such as those associated with inactivity fees or account closure fees, are not uniformly applied to all products and services in the prepaid segment. Due to these reasons, it is very challenging for customers to select or locate the best-prepaid product options among all available options on the market. The Consumer Financial Protection Bureau (CFPB) has adopted several new rules and directives to promote feature standardization. Furthermore, it will take some time before these restrictions are fully implemented because they are still in their infancy.

Global Prepaid Card Market Opportunities

The Unbanked and Under-banked Population

Numerous groups, including lower-income households, households with less education, younger households, and others, have high rates of underbanked and unbanking. The FDIC (Federal Deposit Insurance Corporation) reported that in 2018, 6.5% of American families lacked a bank account, meaning that there were still 8.4 million American homes operating in the economy without one. Prepaid cards are typically the choice of such groups because they are reliable, affordable, and necessary banking replacements that may meet their needs for financial transactions.

For example, in 2017, there was a 37% increase in prepaid cards in LAC coming from Mexico, which led to a stunning 58% increase in the typical number of transactions. This spending pattern is one of the unmistakable signs that prepaid instruments have become a part of daily life for many groups, and consumers are willing to consider different prepaid card possibilities. As a result, it is anticipated that the growing use of prepaid cards among the unbanked population will generate attractive prospects for the market's players.

Regional Analysis

The region-wise segmentation of the global prepaid card market includes North America, Europe, Asia Pacific, and LAMEA.

North America and the Asia Pacific will lead the prepaid card market

North America will presumably command the regional market while expanding at a CAGR of 13.8%. The main variables impacting the expansion of the prepaid card industry in North America include the massive unbanked/underserved population, rising demand for travel cards, enormous closed-loop market, developed market for business and government programs, and increase in prepaid card usage. This region comprises approximately 25 billion unbanked people, so they make up the primary market for prepaid cards. Additionally, the United States alone makes up more than half of the global prepaid card industry. The industry is also expected to rise due to increased digitalization, cloud banking, and improved mobile banking.

Additionally, the growth of the e-commerce sector and the increase in internet users, card awareness, accessibility, and simplicity of use all contribute to the market. The significant underbanked population in the United States is primarily responsible for the market expansion for prepaid cards. For instance, on September 1, 2018, American Express and Walmart jointly launched the “Bluebird card,” a prepaid card that can be linked to a mobile app and has no minimum balance requirements. Due to cheaper fees, this is the ideal replacement for current accounts. The expansion of the e-commerce sector also offers market participants new prospects for growth.

The Asia Pacific is presumed to hold USD 3,171 billion, growing at a CAGR of 17.85%. The Asia-Pacific area owns a large portion of the prepaid card market due to its widespread use in Australia, China, India, and Japan. Prepaid cards are used in Japan for micropayments in several locations, including airports, vending machines, high-way service stations, and public transportation. Additionally, the expansion of prepaid in India is driven by the unbanked population since people prefer to spend money in their own way. Prepaid cards are also frequently accepted in China as gifts and staff perks. There is a sizable unbanked population in Asia-Pacific, and numerous enterprises still operate with cash.

However, the increased internet use in Asia-Pacific's rural areas presents a profitable prospect for market expansion. Because 90% of post offices in India are located in rural regions, the country's Department of Posts aims to introduce prepaid cards, which will assist raise awareness among rural customers. Additionally, the government has begun disbursing wages and social security benefits via prepaid cards, which is anticipated to open up the lucrative potential for market expansion.

Segmental Analysis

The global prepaid card market is bifurcated across the card type, usage, end-user, and region.

Based on the card type, the segments are open-loop prepaid cards and closed-loop prepaid cards.

The closed loop card section is presumed to hold the largest revenue share, growing at a CAGR of 14.87%. A closed-loop prepaid card is preloaded with money in advance for certain goods and services the issuer offers and can only be used at one retailer. Low fraud risk, ease of accessibility, and affordable interest rates are some driving forces behind the closed-loop prepaid card business. These cards make processing simple and are reasonably priced. The issuer of a closed-loop prepaid card can give consumers various benefits, such as discounts packed together. The market for closed-loop prepaid cards is expanding due to the benefits offered by these cards.

The open loop card section will hold the second-largest share. A typical open-loop prepaid card is one that clients use to make purchases at point-of-sale establishments. Prepaid cards with multiple uses are becoming more popular with consumers who lack access to debit or credit cards or other electronic payment methods. These prepaid cards are also utilized by tourists as a short-term payment method to facilitate currency exchange and instantaneous money transfers across cards.

Based on the usage, the segments are general-purpose reloadable cards, gift cards, government disbursement/benefits cards, and payroll cards.

The general purpose reloadable card section will presumably hold the largest market share, growing at a CAGR of 14.3%. The sort of prepaid card known as a general-purpose reloadable prepaid card can be used as a debit card linked to a bank account but is unaffiliated with the bank. It offers the same comfort and facility to customers using credit and debit cards and fraud and mistake prevention by employing personal identification numbers (PINs). Due to reduced liquidity, electronic payments have caused a paradigm change in the finance industry. Due to this trend, several prepaid cards, including the general-purpose reloadable card (GPR), have become more popular for managing cash.

The gift card section will hold the second-largest share. A gift card is a prepaid magnetic stripe card with a set expiration date that cannot be reloaded. Because they can be used at any merchant point-of-sale terminal, prepaid cards are frequently given as gifts. These gift cards can also be personalized for special occasions. Many banks and shops offer gift cards that are customized and printed with a personal message.

Based on the end-user, the segments are retail establishments, corporate institutions, government, and financial institutions.

The retail establishments' section will presumably hold the largest share, growing at a CAGR of 12.9%. Increased online activity and increased internet use for bill payment and shopping encourage online payment methods like prepaid cards. The rising purchasing power of young people in North America and Europe has increased the prevalence of prepaid cards in retail locations. Prepaid cards are increasingly being used in retail settings because of their improved efficiency in terms of risk management, increased security, flexibility, quick liquidity, and reduced processing costs.

The government section will hold the second-largest share. Due to the speed, openness, and accessibility of electronic transactions, governments aim to maximize the advantages of electronic payments and decrease the use of paper checks for payments to individuals. Globally, governments concentrate on limiting the use of paper checks and considering alternatives to direct payment. Several governmental entities have expanded the usage of electronic payments for direct deposit.

Recent Developments

• In 2022, Green Dot Corporation and Plaid established a cooperation to offer GO2bank customers secure open finance solutions. The companies joined forces to provide GO2bank customers with an API-based, token-based open financial experience that enables the data connectedness that today's consumers want. The collaboration uses Plaid's ground-breaking open financial API product Plaid Exchange, which allows businesses to safely and swiftly enable data connectivity on behalf of their clients.