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A vendor of software used to process private-label prepaid transactions disagrees with a recent Aite Group LLC report that says volume on private-label cards decreased 5% last year and will remain flat for the next few years (CardLine, 5/6). In the report, Aite analyst Adil Moussa estimates that private-label, closed-loop prepaid card volume decreased to $38 billion last year from $40 billion in 2007 and that volume will remain between $38 and $39 billion through 2011. He attributes the stalled growth to the recession, which has caused several brick-and-mortar stores that sell and accept gift cards to close, and to heavy competition from open-loop prepaid cards. But Gary Dinkin, CEO of SmartClixx LLC, the Boca Raton, Fla.-based software provider, contends other factors make up for store closings. "People are still going to use prepaid products for gift-giving and other opportunities," he tells CardLine sister publication Cards&Payments. "I don't think that's going to dry up because of the economy." Aite's estimates also do not jibe with the volume on private-label cards processed by SmartClixx customers, Dinkin adds. SmartClixx clients, which include Southwest Airlines and the Chico's women's clothing retailer, collectively processed $10.6 billion worth of private-label transactions last year, up 15.2% from $9.2 billion in 2007, Dinkin says, noting the total that year was up 39.5% from $7.6 billion in 2006. Those figures include only transactions that activate prepaid plastic or virtual, online prepaid accounts. Such transactions could occur when consumers buy cards or when retailers issue them one as a refund or other merchandise credit, Dinkin says. The totals do not include balance inquiries, redemptions and card reloads, which would triple volume, he adds. Moussa stands by Aite's estimates, which he says Aite compiled from published results of annual consumer surveys conducted by such prepaid processors as First Data Corp. and Stored Value Solutions Inc. Aite considered transactions that load value on the cards, purchases made with cards and load amounts. It did not count promotional transactions, such as when an organization would load $10 each onto 100,000 cards that consumers may or may not redeem. Unlike in previous years, Aite did not use transaction data reported by processors. "Processors have a tendency to exaggerate their volumes, and they tend to count all kinds of transactions: returns, balance look-up, promotional loads, etc.," Moussa noted in an e-mail message. "That tends to skew the data considerably." First Data, Stored Value Systems and Metavante Corp., three closed-loop processors profiled in the Aite report, declined to comment.
