Growth in prepaid debit card networks that offer reload services through retail outlets may have plateaued, but check-cashing stores and remittance providers could present new expansion opportunities.
InComm Inc. of Atlanta offered reload services at 150,000 locations as of the end of June, giving it the broadest reach in the market, according to the 2010 edition of the EFT Data Book, which will be published Thursday by ATM&Debit News.
But that total is only a 3% increase from the 145,000 locations InComm reported a year earlier, according to Gwenn Bezard, a research director at Aite Group LLC.
But there are only so many retail sites where InComm can offer its service, Bezard said. "The numbers suggest" InComm "may have hit a ceiling."
Aite collected its 2007 figures from various surveys and reports. Most InComm reload sites are in retail stores, such as supermarkets.
Bezard said the check-cashing stores and remittance providers offer a growing channel for marketing and selling reloadable prepaid cards.
InComm rival NetSpend Corp. is making deals to move in that direction. In May, NetSpend announced a partnership with MoneyGram International Inc., one of the largest remittance companies.
The agreement enables NetSpend prepaid debit cardholders to load funds into their accounts at any of MoneyGram's 40,000 U.S. locations.
NetSpend's 90,000 reload locations in June gave it the second most behind InComm.
That total is almost double the 17,000 locations the Austin card provider had a year earlier, Bezard said. NetSpend had 8,000 locations in 2005.
"That growth is a testament to the channel they decided to pursue," he said.
Though demand is increasing for open-loop prepaid cards, the amount of money loaded on to closed-loop prepaid card accounts is growing slowly.
According to a report released last week by Mercator Advisory Group, U.S. consumers loaded $187.2 billion on to closed-loop prepaid cards in 2008, up 4.2% from 2007.
Growth in the closed-loop card market is in a "rut," the report said. "Few investments are being made to create innovative solutions that increase the value of closed-loop cards."
Closed-loop cards are growing in some niche markets, Mercator said, including digital media, which grew by 24% last year; consumer incentives, which grew by 19%; and petroleum, which grew by 23.2%.
But growth in these segments could not offset other segments that underperformed, notably transit and campus cards, which are being replaced by open-loop cards, according to Brent Watters, a Mercator spokesman.
"There is slow growth in these areas," Watters said. "For example, the Chicago Transit Authority is planning to replace its closed-loop CTA card with an open-loop card."
