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Prepaid Trends spoke with Brian Triplett, global head of prepaid products for Visa Inc., to find out what he sees happening in the industry and what makes for a successful prepaid card program.
PT: What makes up the prepaid market–gift cards, reloadable cards, payroll cards, etc.?
What we've really seen over the last few years is a great evolution of the prepaid market from gift cards to a lot broader market. I think of prepaid on two platforms: reloadable and nonreloadable.
Reloadable cards are used in the retail channel, commercial channels and government channels. They include general-purpose cards, retail cards for consumers who don't have or don't want access to credit and debit cards, payroll cards and government-benefit cards. I also don't want to leave out health care.
Nonreloadbale cards are things such as gift, travel and rebate cards.
Prepaid is a natural extension in our leadership in debit, replacing cash and checks and with electronic payments.
PT: What prospects does prepaid have? How big can the market get?
We're just scratching the surface. There are so many opportunities across the consumer base and in commercial and government channels. I can't share specific numbers in terms of sizing, but we are barely scratching the surface.
Prepaid really fills out the whole spectrum of electronic payment options for consumers. Not everyone can obtain or wants to obtain a credit or debit card.
Prepaid products can be used by anybody. From a consumer-driven solution or cards provided to [consumers] by a commercial enterprise or government, prepaid is a solution for many opportunities.
That's why we are seeing prepaid being adopted by government. They get out of the paper processing, and they get out of the operational issue of trying to track down where the recipient is. It is simple to load the product and not have to worry about where to send the check.
We are seeing prepaid cards being used for incentive programs. Instead of sending a paper incentive coupon, the consumer is getting a Visa prepaid card. It is an enhancement to the consumer experience.
PT: Where will growth come from in prepaid?
Prepaid is still an emerging category. We're seeing growth across all segments. It is opening up new distribution categories and channels.
We're seeing our biggest growth these days through the general-purpose, reloadable channel. Consumers are funding [the cards] themselves, or getting funding in the commercial or government environment.
Consumers are adopting these products because of the traditional Visa value proposition: convenience and security. They can use them more conveniently at fuel pumps and restaurants, for example. They are much more secure than carrying cash.
This is giving access to other consumers who didn't have access before to the same value proposition. From the commercial or government side, [increase in card use] is being driven by getting out of payment processing. It means much more efficient transactions with their client base.
PT: Where in the world is prepaid growing the fastest? Why?
We're still seeing the fastest overall growth in the U.S. This is where prepaid started. Our growth here is very strong across all the different product types.
We're starting to take our successes in the U.S. and apply them in a customized way to other markets. Some of the markets we are starting to see take off are Australia and Latin America.
A great example of that is in Brazil, where we have the Visa Vale program. Part of the benefits companies provide to employees in Brazil is providing funds for meals or groceries.
It used to be a paper-based program. With the Visa-based Vale, it is easier to control disbursements and manage where funds are used.
PT: Who uses prepaid, and who will use it in the future?
We are seeing great adoption from all channels. From a consumer standpoint, we see the underbanked or unbanked adopting the general-purpose cards. Growth there is great.
We're also seeing banked customers purchasing prepaid cards for very specific uses, such as gift cards, travel cards and the [Visa Buxx] card for youth. We continue to see them grow in commercial and government segments.
There is a very specific value proposition for each consumer group–that is why we are seeing consistent growth across all segments.
PT: What form will prepaid payments take–electronic, mobile phones, the Internet?
They are going to take the form of what meets the consumers' demand. We consider prepaid as one of our core businesses, like debit and credit. Whatever we do for debit or credit, we do for prepaid.
Mobile is an exciting piece of that.
Areas such as virtual cards for online use will be part of that. It really is for online use. It is a virtual account, so there is no plastic issued. It would be a Visa account number for use online.
This is really about giving consumers choice no matter what type of Visa product they use to allow them to access that in a way that is commercially available.
PT: How should companies and consumers use prepaid payments?
Prepaid is such a flexible platform, with reloadable and nonreloadable cards, and all the features and functionalities–[the cards] are being used today in a wide variety of ways. In some ways I am surprised by how people have been creative in using the platform. From my standpoint it is not about how to tell companies how to use the card. It is about finding a way to provide a platform that fills a need for them.
We're seeing some geographies where prepaid is being used as a turn-down product for an alternative. Consumers who apply for credit cards and don't qualify are getting prepaid cards. That alternative is a great way to use the product and was done very creatively.
We're seeing others who issue a prepaid card as a companion card to a debit card. People have all sorts of different uses for it. They use it for youth or somebody else in the household or to budget money.
It is a prepaid card, but attached to that consumer's DDA at a that bank or financial institution.
PT: What factors are important for a successful prepaid program?
There are four things that drive successful programs.
First, make sure it is aligned with the business strategy of the organization. Companies need to align it with what problem they are trying to solve for the consumers.
Second, companies must integrate it into their operations and subsystems so that the program is as efficient as possible.
Third, companies need to drive awareness [of their prepaid cards] at point of sale and with sales support. [A prepaid card] needs consumer awareness, and the best place to drive that is at point of sale.
Fourth is being creative in the development and roll out of your program. There is so much opportunity within prepaid to position it for what that organization is trying to do. Companies need to use prepaid cards as part of providing a unique value proposition to consumers.
If an organization getting into prepaid does those four things, they have a high likelihood of success.
PT: What risks does prepaid face?
The one risk we focus on heavily is education. Education is key–both consumer education and education for regulators and lawmakers. As an industry, we can't allow misinformation to lead to decisions that stifle innovation or growth of the prepaid category. There isn't a "one-size-fits-all" approach for the prepaid category.
As a new industry there is a lot of awareness and education going on to make sure consumers understand and feel comfortable with the product. We need to make sure regulators also feel comfortable so they don't put anything in place that affects the market negatively.
We need to be making sure prepaid cards are really convenient. We have done this with partial authorization, for example.
We need to make sure that the experience for the consumer is very positive. Consumers need to be able to use all the funds on the card. We make sure they have a convenient way to reload the cards through Visa ReadyLink.
In the health card world, we need to make sure auto-substantiation is also in place, so that consumers know if a purchase is an eligible medical-expense item.
The entire industry is involved in driving acceptance, adoption and awareness of those [point of sale] enhancements.
PT: Where does prepaid fit into Visa's strategy?
Prepaid cards really are the natural extension of our debit strategy. Trying to get the utility, convenience and security to audiences and payments that haven't benefited from the payments
What we try to do as Visa is to replace cash, checks and paper solutions with payments that are more convenient and secure.
We think this is a very key category to extend our leadership in payments.
