The prepaid card market has blossomed recently, giving us simpler, safer and accessible ways of paying for goods and services wherever we are.
Globally, the prepaid market is predicted to reach north of $3trn by 2022, with major growth coming from the unbanked.
In the UK, the picture is also positive, though the customers are different. We’re expecting further growth in open-loop mobile payments (widely accepted prepaid cards and devices issued by the likes of Mastercard and Visa). We’re seeing more use of prepaid cards at events and for business expenses. We’ve seen digital gift cards grow and prepaid spending on leisure rise in line with millennials’ and Gen Z’s spending habits.
But there are some key shifts in the prepaid market heading our way, and CX underpins them all.
Let’s take a look at why CX is critical for the prepaid market – both to enable its growth and to ensure its future.
Look east for mobile payments innovation
Since the launch of the prepaid Octopus card in Hong Kong way back in 1997, Asia has led the way in prepaid innovation. Now China is the world’s biggest market for wearables – and it’s growing fast, thanks to affordable, innovative devices.
Look to Asia for emerging prepaid innovation.
The cost of wearable payment devices will fall
The price of general wearables has fallen steeply – just take a look at the Bip S, Amazfit’s £55 fitness tracker that launched at CES this year.
Simpler wearables like the Bip S lack payment functionality, but as the cost of active chip technology normalizes we’ll also see further drops in the price of wearable payment devices. The Fossil Sport watch is now available for under £100, while we saw great-value wearables from Xiaomi, Diesel and Skagen premiere, also at CES.
Biometrics will remove the convenience/security tension
Mainstream consumers have been wary about trading security for convenience. That’s going to change as biometric authentication becomes widespread.
Apple’s recent move to join Google and others in the FIDO Alliance, an industry body that promotes passwordless authentication, is a clear signal that the days of pincodes and passwords are drawing to a close. Consumers will increasingly use their faces, voices and fingerprints to log in to websites and apps and manage their prepaid accounts.
The shift to biometric security will help consumers feel more comfortable using mobile and wearable payment devices. That perception of lower risk will, like falling costs, drive adoption. Which leads us to…
In Europe, wearables will go mainstream
It’s a long time since bankers dug chips out of their Oyster cards and superglued them to their watches.
Europe saw an eight-fold increase in wearables in 2019, led by the Dutch. Consumers en masse are starting to embrace the convenience of NFC-enabled devices not just from Apple but from traditional watchmakers and fitness tracker providers. Devices like Lyk’s Waveband give holidaymakers splash-proof wearables for easy payments at the beach. There’s even payment-enabled jewellery such as Mastercard’s K ring and LAKS Pay’s bracelets and keyrings.
Prepaid services and disruptors will face old-school competition
What does this mean for prepaid? Well, providers may face increased competition from traditional banks, as their customers leapfrog prepaid and adopt wearables linked to their main current account. Traditional banks are also moving into the prepaid marketplace – see ABN Amro’s wearables shop and Barclays’ Pingit.
So how can prepaid providers maintain their edge? The smart money’s on providers who target users in specific locations or contexts (parent/child payments, business expenses, event-driven spending) and those who provide effortless CX.
Expect more brand partnerships
The Apple Watch has been joined by NFC-enabled devices from the likes of Fitbit, Garmin, TAG Heuer, Mondaine and Swatch. That list is only going to grow, as providers find more ways to embed easy payments into our favourite brands’ products and services.
And some are betting prepaid can be aspirational. Canadian prepaid account provider Koho’s metal contactless cards are available for a premium fee – which is slashed if an account-holder recruits two friends.
Get your coffee quickly with Costa’s Clever Cup.
Other brands have looked to prepaid to capture attention, provide a seamless CX and build brand loyalty. Take Lucozade, who gave out bottles with a built-in free Tube ride, or Costa Coffee’s Clever Cup, so you didn’t need your wallet for the coffee run. These may sound like gimmicks, but remember, it’s all about building the right empowerment into the customer journey. That’s where you can deliver genuine value.
Expect more event or location-based partnerships
As high-street spending moves towards account-linked mobile payments, prepaid is discovering new niches and combinations that enhance people’s experiences of locations and events.
Perhaps inspired by Disney’s Magic Band, which gives Florida visitors seamless access to Disney’s parks, hotels, shops and restaurants, providers such as Festipay offer cashless payment, ticketing and access management at beach clubs, spas, rock concerts and street food festivals.
This year, LAKS Pay and Mastercard launched Ski2Pay, a combined prepaid card and ski pass that gives skiers access to ski lifts and hotels and lets them pay in shops and restaurants in 100 resorts worldwide.
And prepaid can prove its value in emergency situations. Homeowners in Herefordshire flooded by Storm Dennis will receive charitable prepaid cards to help them with initial emergency expenses.
What does this mean for prepaid?
So there’s a rise in mobile payment devices and infrastructure in advanced markets, supported by the big banks. That’s pushing prepaid providers to seek new markets where customer context and location are key.
To make these emerging prepaid products successful, providers have to understand their users’ needs. If the experience isn’t smooth, if the benefit isn’t clear, they’ll provoke rather than empower their target customer. Those who adopt user-centric design and focus relentlessly on their customers will win. Those who don’t? I think we all know the answer to that.
Danny Bluestone, founder & CEO of Cyber-Duck