Over 300 delegates attended this year’s Prepaid Cards Summit, held in Rome on 12-13 November. The success of Poste Italiane’s prepaid portfolio, which now has 5.6 million participants, was an excellent indication of the opportunities in prepaid – a point the first-rate line-up of speakers keenly discussed.
VRL, publisher of RBI and its sister titles Cards International and Electronic Payments International, ran one of its most successful conferences in mid-November.
The subject was prepaid cards, and opportunities for financial services institutions, retailers, post offices and government agencies in adopting prepaid solutions. Over 300 delegates from around the world, representing banks, payment networks, vendors and programme managers, attended the event and heard the latest information on prepaid from an array of leading industry speakers (see www.prepaidcardssummit.com).
The two-day event looked at the successful implementation of prepaid programmes around the world and recent launches in countries such as Italy, the UK, Poland, Romania and the US. It also examined the challenges the prepaid industry faces in increasing adoption rates in all markets as well as key ones such as Germany, France and India.
Some of these challenges include better segmentation (i.e. moving away from the notion that prepaid cards are only for unbanked and underbanked markets); more attractive fees and charges; and better, stronger marketing with clearer messages about the benefits of prepaid cards.
Volker Schloenvoigt, a consultant at Edgar Dunn and Co, voiced concerns that perhaps some mature countries were still not ready to accept prepaid cards. Germany in particular was singled out as a market that has been very reluctant to embrace prepaid – though opportunities for growth remain.
“In Germany… there are about 200,000-300,000 active cards, ignoring gift cards,” Schloenvoigt said.
“There has been some very interesting research by the German central bank, looking at payment preferences of consumers. Its conclusion was that only about 0.2 percent of transactions by value are going through prepaid cards at the moment.”
He added: “In Germany there are free credit cards with free ATM access and so forth, and so when you look at some of the prepaid card pricing it might not necessarily be very competitive. If you are targeting the unbanked, and then charging €40 [$60] a year management fees plus all sorts of other costs, intuitively that does not quite work.”
In contrast, some of the biggest interest in prepaid cards has come from post offices. Michael Birchall, prepaid product manager at the UK Post Office, for instance, gave an exclusive launch announcement to the summit.
Following on from the launch of the Travel Money prepaid card in 2006 and the Christmas Club and Gift card in 2007, the Post Office has taken the decision to launch a prepaid closed-loop card, the Post Office Budget card, in 2010.
It works as a deposit product issued by the Bank of Ireland and operates in the same way as Post Office savings stamps.
Birchall also announced that the Post Office is considering launching a sterling denominated general-purpose prepaid card to leverage the Post Office’s network and brand. An OJEU (Official Journal of European Union) tender notice will be published in December 2009 or January 2010 to engage with interested parties, with Birchall telling delegates to “watch this space”.
Italy: Europe’s most successful market
Rome was a fitting location for this year’s event, given that Italy is home to one of the world’s most successful prepaid programmes, the Postepay card offered by Poste Italiane, which now has 5.6 million cards in issue.
Flavio Mastrangelo, head of prepaid products at BancoPosta, the financial arm of Poste Italiane, and Alessandro Albano, head of payment systems at BancoPosta, both took to the stage to outline the development of the programme to date and newer prepaid innovations that the organisation is now rolling out.
Now in its sixth year, the Poste Italiane Postepay card has proved incredibly popular with younger consumers. Around 48 percent of Postepay holders are under the age of 30, who account for 55 percent of all transactions.
However, Postepay is not just a product for young consumers in Italy – 10 percent of customers are non-Italian, and 30 percent of all Postepay transactions take place abroad. Around 54 percent of Postepay transactions take place on the web. The success of the product has provided Poste Italiane with a valuable cross-selling tool – 52 percent of Postepay customers have another Poste Italiane product.
Poste Italiane is now branching out into other prepaid products, such as a corporate offering and launching Poste Italiane as a mobile network operator to capitalise on the synergies between prepaid and mobile payments.
In 2007 it also introduced a contactless card and there are now 60,000 active cards in the marketplace, which has led to Poste Italiane developing multi-application prepaid propositions for use in the transit and access spaces. Its latest product launch in January 2010 will be the ‘Postepay&Go’ contactless prepaid card for use on public transport in the city of Ravenna.
Poste Italiane is also moving into the money transfer space through its Postepay TWIN proposition, a card-to-card solution available at over 14,000 outlets of Poste Italiane targeted at the international remittance segment.
Control spending and cut costs
Many in the industry have highlighted prepaid as an ideal consumer and corporate tool to control spending and cut costs, two themes which have become all the more important during the recent global economic turbulence.
The keynote presentation of the summit was given by Matt Lanford, head of prepaid in Europe at MasterCard Worldwide, who outlined how the economic situation had created a “golden opportunity for prepaid” to meet all stakeholder needs. However, he said, the challenge over the next year was for the industry to demonstrate that “prepaid is more than a recessionary phenomenon”.
Prepaid’s consistent strengths, he added, included no direct link to an individual consumer bank account, the ability for programmes to be customised as required, and its alignment with cutting-edge payment technologies and innovations.
To harness prepaid’s potential, Lanford stated, it was necessary to target those economies where the ‘prepaid as everyday money’ message is resonating most, and to map markets where loyalty and dependency upon cash is most prominent. Corporates and governments also have their parts to play by advocating the benefits of convenience, security and everyday money management, and leveraging corporate desire for cost cutting and efficiency and government drives to promote financial inclusion.
Above all, Lanford concluded, “prepaid offers the opportunity to diversify offerings to meet changing consumer demands, rejuvenate customer relationships and improve ‘stickiness’, differentiate from competitors, and harness valuable information about customers’ spending habits through the natural extension of existing product portfolios to include prepaid”.
Here to replace cash
Fiona Duncan, vice-president at Visa Europe heading up the Prepaid Centre of Excellence, spoke about upcoming technologies in the prepaid and contactless card sphere, explaining what she currently sees as the major demands in the market.
“From Visa’s perspective we are here to remove cash from the marketplace,” Duncan said. “We are not going after debit, we are not going after credit, we are going after cash and cheques. But in order to replace cash you need to have a product that is better than cash.
“One of the major advantages with cash compared to card is the speed of transaction. If we want to take cash out of things like ticketing, if we want to take it out of concert venues for example, if we want to have quick, low-value purchases, we need speed and the only way you can do that is with an offline solution.”
Innovations in the credit and debit market were also covered by Duncan, especially as a product recently launched by Visa attempts to combine the three.
“We have just launched a product called Simply One. This puts debit and credit on the same card, and this enables the consumer to choose how they want to pay at the point of purchase,” Duncan added. “Now we are in the middle of discussions with members to launch this as ‘prepaid plus’.
“On this card you’ll start to see issuance of prepaid plus. Prepaid plus credit, prepaid plus debit and prepaid plus prepaid. What this means is that as a prepaid issuer you have the ability to start to integrate other payment applications in for the consumer at that point.”
For more information on the event, please visit www.prepaidcardssummit.com. The Prepaid Cards Summit was kindly supported by MasterCard (Premier and Workshop sponsor), First Data (Gold sponsor), SIA SSB (Gold sponsor), Visa (Gold sponsor), Accor Services (Silver sponsor), FIS (Silver sponsor), PayPal (conference bag branding), Ukash (badges and lanyards sponsor), BemroseBooth (exhibitor), International Business Wales (exhibitor), Stored Value Solutions (USB sponsor), Transact Network (lunch session sponsor), Citi (brand session sponsor), Epipoli (brand session sponsor), Laser (brand session sponsor), eCommLink (brand sponsor), Euronet Worldwide (brand sponsor), and the official research partner, TNS.
Research Exclusive prepaid research from VRL and TNS
One of the key presentations came from VRL which, again in conjunction with global market research firm TNS, updated its groundbreaking 2008 research into prepaid awareness in the UK by widening this year’s research to over 6,000 consumers in the UK and Italy.
Whereas 50 percent of UK consumers surveyed were aware of what prepaid cards were and how they worked, in Italy the figure was 59 percent.
But while 19 percent of Italians surveyed were not aware of prepaid, that figure rose to 33 percent among UK consumers, suggesting that issuers and payment networks still have an uphill job to do in terms of educating consumers.
However, progress is being made – last year, 10 percent of UK consumers were aware of prepaid cards but did not really understand how they worked. This year, that figure has risen to 15 percent, indicating that advertising campaigns by programme managers and education initiatives are beginning to have an effect.
Fears about online security are also helping the uptake of prepaid – people in some markets are still wary about using their credit and debit cards online, whereas prepaid offers a relatively risk-free alternative.
The VRL/TNS survey found users of prepaid cards, in both the UK and Italy, do not perceive they are paying a lot in monthly fees or charges to use their cards.
Around 40 percent of UK prepaid users perceive there are no monthly fees, compared to 35 percent of Italians surveyed. In contrast to perceived viewpoints, costs do not seem to be a major barrier to use.
To receive the full VRL/TNS research, as well as to find out more information on all the presentations at the Prepaid Cards Summit, please contact Jeannie Lam on +44 (0) 20 7563 5640 or at email@example.com
Speakers included (left to right): John Yeomans of FIS; MasterCard’s Laura Kelly; and Flavio Mastrangelo, BancoPosta