Prepaid
Once a niche product, prepaid is coming of age in Europe
and is gradually moving into the main stream.
Identifying which segments will drive the industry’s
growth is now the major challenge for issuers,
processors, and programme managers across the region.
After a number of false dawns it seems that the prepaid
card market is gradually building a critical mass in
Europe, with all major markets supporting a range of
innovative open and closed loop products. PSE
Consulting’s latest research reveals prepaid to be a
sector which has achieved substantial growth over the
past two years, with further expected expansion in the
short and medium term. With almost 5% of POS spend
being generated by prepaid products and 132 million open
loop cards, issuers across the region should be
considering prepaid as an integrated product.
However, the European region is far from homogenous as
different markets will have their own unique market
structures which generic prepaid products will struggle
to address. This is driven by the differing levels of
development of the prepaid market, the context for
payments, and the varying attitudes to innovation.
Issuers will need to ensure products and pricing are
tailored to the needs of each market and prepaid
segment.
Analysis has shown that ATVs vary significantly between
prepaid segments, as do the volume of transactions.
Very high ATVs in Healthcare and Insurance are
associated with high claim amounts in the segment;
however the attractiveness of this segment is offset by
the very low volume of transactions. At the other end
of the scale, Public Transport and Youth are both
characterised by very low ATVs, but they generate
substantial transaction volumes.
Similarly, analysis of open-loop prepaid card products
indicates a different set of revenue drivers across
segments. They include card purchase and maintenance
fees, POS interchange and potential breakage. Cost
drivers include set-up, processing, customer service,
marketing, and potential write-offs. These differing
revenue and cost elements must be considered when
targeting prepaid products at specific merchant or
consumer segments.
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PSE has
substantial experience in the prepaid market as
we regularly execute a wide range of prepaid
consulting assignments for leading companies
across Europe. PSE has also completed three major studies into the European prepaid
business case. The types of questions we help
clients answer are: |
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What are the
requirements of cardholders and corporates for a
prepaid product offering? |
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How do I build
a compelling prepaid proposition and how does
this translate into a series of products? |
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When should I
begin my prepaid programme and what is the
critical number of cards to support a valid
launch? |
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What revenue
models should I expect to use and will they be
the same as the US market? |
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What are the
key barriers and inhibitors to market entry? |
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What
constraints will national and European
regulation place on the growth of prepaid –
eMoney and EMLI? |
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Will prepaid
increase footfall, average spend and loyalty? |
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What is the
business case for our organisation to enter this
market? |
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