Despite the global coronavirus pandemic, key segments of the prepaid card industry continued to expand, providing simpler, safer, and accessible ways of making purchases. Consequently, the value proposition of the prepaid card industry has emerged strongly, which is expected to drive future growth.
Notably, a significant part of the growth in the global prepaid card segment is expected to come from the unbanked population. Over the next four to eight quarters, B2B prepaid card segment is expected to be a high-growth area globally. Prepaid payment instruments focusing on retail, corporates, and government segments are also anticipated to record high growth as compared to general-purpose prepaid cards. One of the key segments, where a significant value can be unlocked over the short to medium term is the government disbursement through prepaid payment instruments.
For instance, when the CARES Act money was disbursed in the United States, the government needed an efficient payment solution to get the money out to the people who needed it quickly. Notably, prepaid cards were much more efficient for the US Government as compared to paper checks. A similar trend was noted across key economies in Europe and the Asia Pacific as well.
Prepaid cards for disbursement of financial aid by government institutions:
Globally, the adoption of prepaid payment instruments for distributing funds for social benefits such as child support and unemployment benefits has been increasing. However, the need for flexibility and speed that emerged during the global pandemic highlighted their real potential for delivering other kinds of funds to citizens, especially the unbanked population.
Many governments around the world are disbursing aid packages through prepaid payment instruments, as they allow the distribution of aid more quickly and securely.
- In 2020, millions of Americans received stimulus payments through prepaid cards. Government authorities transferred US$1,400 in prepaid cards as part of unemployment benefits. In other countries, stimulus payments and unemployment benefits have been recurring since the coronavirus outbreak. Consequently, resulting in the growth of the global prepaid card industry during the pandemic-hit year.
Open banking API supporting growth of prepaid card market:
Prepaid card providers are partnering with banks to enable open banking payments for consumers. The open banking platform is expected to increase the appeal of the prepaid card while allowing companies to meet the ever-changing demands of existing customers and attract new consumers. For instance,
- In December 2020, two leading MasterCard prepaid card providers, K Wearables and Their Perfect Gift, partnered with Nuapay. This strategic partnership with Nuapay will allow both K Wearables and Their Perfect Gift to reduce processing costs. Notably, the partnership has also simplified the gift card buying process for consumers. For instance, under the partnership, the open banking payment system of Nuapay will be integrated into Their Perfect Gift online checkout, allowing consumers to purchase the gift card of their choosing without a credit or debit card. Similarly, for K Wearables, the partnership will allow customers to top up their K Wearables prepaid card using the open banking payments system offered by Nuapay.