Roundtable Concludes The UK Prepaid Market Is Alive And Very Much Kicking
25th November 2009 12:00am
This month, Stanton Consultancy Limited (SCL) hosted a roundtable debate with some of the top names in the UK Prepaid market. It's clear the UK Prepaid market is alive and very much kicking and that this Christmas is set to be another boom time for Prepaid cards, worldwide.
Despite the slow economy and the downturn on the high street, prepaid cards are being increasingly offered by retailers and other vertical markets and commercial applications are taking off in spectacular fashion.
The UK gift voucher market actually started over 70 years ago and by the 1980s the majority of high street retailers were issuing paper gift vouchers. Since the first plastic gift cards first appeared in the marketplace five years ago, healthy growth of between 10 and 15% has been seen in the UK.
Research house Tower Group estimates that around 375 million stored-value cards will be in circulation in Europe by 2010, a 1000% increase over 2005. It estimates that prepaid card usage will rise 600% to EUR75 billion as banks seek new ways to drive profits following the introduction of the Single European Payments Area (SEPA).
Says Ray Stanton, Managing Director of SCL: "There is no doubt that the gift voucher, gift card and stored-value solutions market in the UK is big business worth around £3 billion per year. The potential is still vast. In the USA the gift card scene is part of everyday life with all the major shopping malls having extensive gift card offerings.
"The second quarter of 2009 saw a 10.5% growth in gift cards, worth £316 million, compared with the same period in 2008. This far outstripped the retail sales growth of 3.4% reported by the British Retail Consortium. Recent research also showed that the average load value on a card is now £25 and that once a consumer has experienced a card, they will definitely buy more. Consumers also tend to spend more than just the value on the card, once they are in the shop.
"There is still a big educational job still to be done by retailers and the industry bodies before we see mass adoption of prepaid cards in Britain, but there is every sign for optimism for sustained growth over the next two years," concludes Stanton.
However, the high street is not the be all and end all for prepaid growth; it's the vertical market applications of prepaid where the greatest optimism sits.
Mike Smith, card services director of Raphaels Bank, says: "We should not view prepaid cards as just a replacement for paper vouchers, cheques or indeed debit cards. However, for them to really take off it will need a major injection of distribution and marketing effort. The secret to success will be added value, not just replacement."
Raphaels has already launched a very successful insurance claims disbursement card, the first of its kind in Europe. The private bank has a host of gift card schemes with individual shopping centres in the UK who are able to issue their own branded gift cards and travel cards aimed at the business and leisure traveller.
"We are looking at a range of card applications for payroll, corporate incentive, money transfer and travel markets and view the immediate future as prime for significant growth," says Mike Smith.
Patrick Roe, sales and marketing director of SCL sees the travel market as one with the most obvious potential for quick growth in prepaid card usage. "The First Choice and Thomson travel money card schemes have been very successful and are popular with travellers young and old, which reinforces these brands on the high street."
Steve O'Donovan of Travelex commented: "We are achieving great success in the corporate market with major brands adopting the Corporate Cash Passport for use by their employees when travelling on business, the controls and the simplicity of administration are not only improving the employee experience but also resulting in significant operational savings for our clients. We have seen Virgin Atlantic adopt our cards to manage the crews' per diem payments globally with many other airlines about to follow suit. British Airways and KLM are also using Cash Passport to compensate passengers. I think that similar applications in the maritime and manufacturing sectors will become commonplace over the next couple of years."
An obvious market for prepaid is to help parents have some control over their children's spend when off to University or to travel the world. VISA, for example, has a specialist prepaid debit card aimed specifically at teenagers and the travel during their "Gap Year".
Top Premier League club Manchester City has brilliantly mixed a season ticket with a card that can be used in the stadium to buy souvenirs and refreshments at the match.
Ian McCann, chairman, CCgroup, a leading PR and Marketing Communications company commented: "I have just been sent a pre-loaded gift card by the Rugby Football Union, to spend at the Twickenham souvenir store whilst attending the England v Argentina autumn rugby international. This is the first time I can recall a prepaid card being sent to me as part of a ticket package, but I am certain it is a marketing ploy that is set to be utilised much more."
It's not going to be uncommon to see prepaid cards used much wider for financial services in the UK. Indeed, CaxtonFX has recently abolished all ATM fees on its popular Euro and Dollar prepaid currency cards to help stimulate the market. With the likes of Virgin, Sainsbury and Tesco are investing heavily in their financial services offerings; it is clear there is a big future for prepaid as part of this growth.
Chris Reddish of the Prepaid International Forum said: "Scale is the key to it all. If people begin to have a proliferation of prepaid options in their pocket, perhaps through their corporate life or may be just be recognising that their Oyster travel card is actually a prepaid offering as well, than everyone will become much more comfortable with the concept."
"For people who do not have access to a credit or debit card, such as short term contractors working in the UK, then prepaid is an excellent option. For example you need a card to buy goods on the internet, so prepaid is a way for these, possibly un-banked workers, to use on-line services," says Chris.
Concluding the roundtable, Ray Stanton commented: "Gifting through prepaid cards in the USA is simply massive and worth over $250 billion per year. Big moves are beginning to happen with "Open Loop" schemes in Europe. For example one of our busiest customers in the world is a major European shopping mall and this is a trend set to continue, as paper vouchers continue to decline. Paypal has just announced open source access to developers for applications development over websites and mobile phones. This is a highly significant development."
"Prepaid and Contactless payments seem like a marriage made in heaven and corporate developments in payroll, insurance, benefits payments and corporate incentives all makes the prepaid scene an environment that looks to have a very rosy future. From a gifting perspective alone, despite the state of the economy, this Christmas is set to be another big step for consumer prepaid adoption in the UK."