What is a prepaid card?

With a Prepaid card, you deposit money into an online account, and then draw on those funds; therefore cardholders can only spend what has been loaded onto the card, enabling better management of their money.

There are no credit checks (or even ID checks) required to get a card. As long as you're 18 or over and live in the UK, you are 100% guaranteed to be approved for a card. Even if you're under 18 (but at least 13) you can get a companion card, linked to an adult's card.

Customers can load funds onto their cards from a variety of sources, such as wages, bank transfer, benefits, or using the Post Office or PayPoint and then use it in-store, online, and even to withdraw cash at an ATM at approved provider locations. Programs such as Freedom Prepaid MasterCard® allow cardholders to withdraw money at over 1.5 million MasterCard locations worldwide.  Cardholders can also monitor their spending via an online account 24/7/365 or via SMS text messaging.

 

The Payment Card Industry

The payment card industry is undergoing a revolution through the emergence of prepaid cards. The industry is being helped by the trend moving towards electronic payments as opposed to cash-based payments, and as debit continues to gain ground on other payment forms, the use of prepaid cards, which are essentially debit products, is set to see even further significant growth over the next few years.

 

Prepaid Card Uses

Prepaid cards can be used for a multitude of purposes - money remittance, travel cards, employee payroll cards, gift cards, telephone cards, expense cards and others - and also enable those consumers who were previously excluded from traditional banking relationships to make card-based payments including on line payments and purchases, along with other services such as money transfers. Research suggests that in the US alone, prepaid is expected to reach more than $840 billion in global volume by 2017, a Compound Annual Growth Rate (CAGR) of 22 percent, and it is the US that is currently leading the world in both the issuance and usage of these cards.

 

Online Shopping

Online shopping, in particular due to the need to pay for purchases with a card, is potentially a key driver for prepaid cards.  With steady growth over the last decade, online shopping for retail and travel is now enjoyed by more than one in two UK consumers, or around 28 million consumers, and are actually outspending their European and American counterparts with an approximate spend per person of £1,312 per year. 'Despite the current recession, we expect online retail and travel sales in the UK to continue growing strongly over the next six years as consumers move their spending online. By 2014, 37 million UK online buyers will spend £56 billion online.

 

Prepaid Card Research

According to MasterCard®, Prepaid Cards are expected to represent 7.9% of card volumes in Europe by 2010.  The flow of migrants across Europe, tighter worldwide credit, weaker global economies, increasing identity theft, and changing attitudes to debt are coming together to create the environment for the rapid growth of the Prepaid Card market. An Alliance & Leicester representative wrote in September 2007: The European prepaid market is currently only in its infancy, but this is set to change with the number of cards in circulation estimated to grow at over 110% a year for the next four years. Once 'loaded' with funds Prepaid Cards work in the same way as traditional credit and debit cards, and can be used wherever MasterCard or International Maestro cards are accepted. They can be used at Point of Sale, online or to withdraw cash from ATM's.

 

Prepaid Card Benefits

Prepaid Cards have the following additional benefits over credit cards:

  • They enable instant domestic and international money sharing by topping up a Companion Card^ from the Primary Card. The Companion Card, or cards, can then be used by someone anywhere in the world where they see the MasterCard/Maestro or VISA acceptance sign.
  • Security over the amount that can be spent on the card is improved by being able to control the amount of money on the card, and therefore money available to spend, rather than being exposed to the fluctuating credit limits given by credit card companies.
  • There are no penalty charges resulting from late payment of bills as Prepaid Cards cannot be 'overdrawn'. Prepaid Cards can be acquired without the need for traditional time consuming and complex bank applications (no credit checks, no need to have a good credit history, longevity of residence, or minimum income requirements).

 

Find out more about how White Eagle can help your business select the right prepaid card product.