Banks Cashing in on Prepaid Cards
Banks are now beginning to cash in on prepaid cards due to debit cards becoming more popular than credit cards, with more and more Banks now offering prepaid cards to their customers as an alternative for people who suffer from bad credit. Most banks now offer a form of prepaid card; one of the most popular products they offer is a travel money card.
Barclays and Lloyds TSB both offer a travel money card, with Barclays now advertising their card more aggressively on the internet. Secure Trust Bank have been in the banking industry for over 50 years, and recently launched a prepaid card linked to a bank account. The launch Secure Trust Bank’s Prepaid Bank Account enables them to offer guaranteed acceptance to all customers regardless of their credit history.
Stuart Williams of Secure Trust Bank said
"Our guaranteed bank account, the first of it's kind in the UK, works like any other current account. It has the facility to set up direct debits and standing orders and a prepaid card to use at over 30 million outlets. The Prepaid Account helps you control your finances and manage your budget by never letting you go overdrawn, plus there are no penalty fees for bounced direct debits."
Industry experts have predicted that in the region the popularity of prepaid cards would reflect the 40 per cent growth, projected globally.
Shankar Sharma, Chief Executive Officer of Arab Financial Services Company said "Growth in debit cards will continue as most issuers have already embraced debit card programmes.
"Even as the banks are putting more restrictions on credit cards, technology has made the prepaid products more accessible to consumers.
"Prepaid programmes in retail will be emerging as a major trend. The retail sector will offer prepaid cards in the form of gift cards and travel cards for everyday payment", said Sharma.
The success of the prepaid mechanism in the Middle East will be a combination of government initiatives with commercial opportunities, said Colin Loubser, COO of NovoPay.
"The prepaid segment is predicted to drive 40 per cent of total consumer spend globally and this region is no exception," said Loubser, ahead of the the GCC Cards summit 2010.
In 2009, 65 per cent of UAE banks licensed for the Ministry of Labour's wage protection system, a move welcomed by community and ILO alike. An estimated one million workers in UAE alone stand to use the system each month.
UAE has already introduced and is successfully operating the e-dirham and G2 e-Dirham.
According to David Parker, Director of Polymath Consulting "In the UAE, the e-Dirham card to improve government's payments, the Metro system operating on a prepaid ticket and the regulation on electronic payment of salaries known as Wage protection schemes; are examples of new opportunities in open loop payroll cards."
Prepaid mechanism provides access to financial services, to the high-volume low-value consumers who may be unbanked or new to banking according to Parker.
"The awareness of prepaid is already huge in GCC region," said Parker.
A research conducted by TNS Middle East said that almost 80 per cent of consumers in UAE, Egypt and Saudi Arabia understood the prepaid products and found it useful.
According to Parker the prepaid growth is driven by three factors, firstly cost and convenience will drive consumers to prepaid, second the corporate has a huge opportunity to save costs through process re-engineering and greater efficiency in operations in prepaid.
"For the banks, prepaid opens an entire new line of product expansion and market segment," he added.
According to Stuart Williams of Secure Trust Bank " When you open your Prepaid Bank Account with Secure Trust Bank, you have full control of your finances. Simply pay your salary, wages or benefits into your account, then all you need to do is make sure that there are sufficient funds in your current account to cover your monthly outgoings. The rest can be transferred onto your prepaid card, and spent safe in the knowledge that your bills will be covered."