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07/10/2011 -
Prepaid gift cards have allowed customers to make purchases at specific stores with the ease of using a credit or debit card. However, these closed-loop cards limits a consumer to one store. In response, open-loop prepaid cards that are supported by credit card companies and valid anywhere that those cards are accepted are growing in popularity.These cards, which are supported by companies such as American Express, Discover, MasterCard and Visa, can be purchased at a number of retailers. For consumers, these prepaid cards are more than just a convenient way to make purchases or give gifts. According to Convenience Store Decisions, these cards are also a way for people without credit cards or bank accounts to make payments without cash in hand.
More than 17 million Americans are without a bank account, according to the site, and this number could rise as banks attempt to charge consumers to operate checking accounts as a way to reduce the impact of swipe fee caps.
As a result, the amount of money loaded on prepaid open-loop cards is expected to jump to nearly $675 billion in the next three years, the Mercator Advisory Group reports in its seventh annual Prepaid Market Forecast. In 2009, that figure was more than $330 billion. Additionally, from 2007 to 2013, the Mercator Advisory Group predicts that the open-loop prepaid market will reach a compound annual growth rate (CAGR) of 36.6 percent, while the CAGR of the closed-loop gift card market is expected to be 5.4 percent. Still, closed-loop, in-store gift cards dominate, as they currently make up more than 87 percent of the market.
"Having now performed six prepaid forecasts, Mercator Advisory Group has found that the diversity of the prepaid market allows it to grow at this blistering pace, as government agencies, corporations, and consumers all find new uses for these cards," explained report author Tim Sloane, vice president of client services and director of Mercator Advisory Group's Prepaid Advisory Service.
Whether a retailer sells the open-loop cards, accepts them, or both, it is important for all staff members to be up-to-speed about how the cards work and what benefits this form of plastic can have.
"The staff needs to be thoroughly trained to answer questions to help consumers who may have questions, and there must be adequate signage available to explain to customers exactly what it is they’re getting," Ben Jackson, a senior analyst for Mercator, told Convenience Store Decisions.
