CHANTILLY, Va. — The prepaid card industry is growing up. The proof is in the name.
Previously referred to mostly as "gift cards," this product was largely seasonal, tying into holiday gift giving. The fact that they are increasingly being referred to as "pre-paid cards" is a nod to the fact that they are becoming more ubiquitous, according to Martin Ferenczi, U.S. CEO of Oberthur Card Systems, based here.
"The prepaid industry has been designated the 'gift card' industry, but early this year we are seeing constant demand rather than heavy concentration in the third and fourth quarters," he said.
Oberthur Card Systems is a billion-dollar company headquartered in France, but Ferenczi said it has a strong presence in the U.S. with 1,000 employees in four locations. The firm manufactures prepaid cards, SIM cards for cellular phones and identification cards, specializing in manufacturing secure payment cards, including Visa, Master Card and American Express cards. "The mailing a consumer receives with their personalized credit card comes from Oberthur," Ferenczi said.
Next Gen 'Smart' Cards
Smart cards, which contain a microprocessor, are an Oberthur specialty, Ferenczi continued. One type of smart card is a contactless card, which, as the name implies, can be waved at a card reader rather than swiped.
This speeds up the process for low-amount transactions that do not require a signature, typically under $25.
"Security for contactless cards is higher than magnetic stripe cards because thieves cannot put stolen info into a contactless card, as they can with a magnetic stripe card," he explained.
Because of this increased security, government ID cards have moved into microprocessor cards.
"We count several large financial institutions among our clients, and we are very proud to be the largest contactless manufacturer in the United States. We have more than 350 financial institutions in our client base," Ferenczi said.
Oberthur works with 20 CUs in the United States. It manufactures cards in Exton, Penn., and Los Angeles, and personalizes cards here and in LA. Cards are delivered to the member or to the CU, depending on the arrangement.
"We add additional value because not only do we manufacture and personalize the cards, we add value in the fulfillment process," said Ferenczi. "We place the card on a 'J-hook' which allows a market to hang the cards on a display."
Ferenczi speculated that consumers may not be able to use their credit cards as often during the current economic downturn.
However, he said, many people have been given or use prepaid cards to avoid a credit issue.
A third possibility is the prepaid industry is evolving and more people are using non-gift card such as prepaid spending accounts or other benefits that are paid through a prepaid card.
Trends in Prepaid Card Industry
"The prepaid industry is extremely vibrant. There is a positive trend moving from credit to debit, and now to prepaid," he assessed. "The trend has been upward for four or five years. The growth rate for prepaid cards is significantly higher than credit or debit cards. At every supermarket, the availability of gift cards is remarkable."
(c) 2008
