Prepaid and Gift Cards in the U.S., 4th Edition

Prepaid and Gift Cards in the U.S., 4th Edition

Gift and prepaid cards are popular as payment tools for American consumers and as gifts for their family and friends. In Prepaid and Gift Cards in the U.S., Packaged Facts forecasts that general-purpose prepaid card purchase values will grow 17% in 2014. Packaged Facts expects closed-loop prepaid card transaction value to grow at 3.6% as the prepaid and gift cards industry faces retail distribution saturation and stagnating consumer usage.

Competitors in the prepaid and gift cards industry are taking steps to ensure their products remain popular with consumers. Driven by the prospect of regulatory intervention and heightened competition, leading prepaid card marketers are adding protections found on debit card products, increasing fee transparency and reducing cardholder costs, as well as experimenting with budgeting and savings tools. As a result, prepaid and gift cards revenue generation models are placing greater emphasis on technological innovation and interchange to drive revenue growth.

Prepaid and Gift Cards in the U.S., 4th Edition provides industry participants with a wealth of insights to help them navigate this growing but quickly changing market. The report:

• Provides a market size and forecast for the prepaid card market, including trended transaction volume for general use (open-loop) and private label (closed-loop) prepaid cards; trended purchase value, purchase volume and interchange revenue generated by general use prepaid cards; plus a separate market size for gift cards.
• Explores a variety of prepaid card industry challenges and solutions, including revenue generation trend adaption, customer relationship building, and customer differentiation.
• Drawing from proprietary survey results, identifies and interprets key prepaid metrics, including cardholder usage costs, monthly spend, monthly purchase, ATM withdrawal, and reload transactions, length of use and intended length of use.
• Identifies the percentage of prepaid cardholders with direct deposit, and then assess the degree that direct deposit influences these above metrics.
• Gauges credit card, debit card, prepaid card and gift card usage trends during 2010, 2011, 2012, 2013 and 2014 by demographic, breaking prepaid card usage down by major association/brand. We also study prepaid, debit and credit card cross-usage trends over time.
• Assesses the relationship between prepaid, debit and credit card usage and consumer loan type usage; and the relationship between prepaid, debit and credit card usage and checking/savings account ownership. In each case, we analyze trends over time, from 2010 to 2014.
• Drawing from proprietary survey results, crafts a gift card market size segmented by gift giving occasion and recipient, providing for gift dollar value estimates for occasion and for recipient, as well as for recipients by occasion and for occasion by recipient. Drawing from the Simmons National Consumer Survey, the report also includes a market size for gift card purchases by retail segment for 2010-2014, with demographic analysis.
• Via proprietary survey analysis, the report identifies reloadable prepaid card brands that consumers use and use most, by prepaid card user demographic; and assesses relative penetration of bank- and nonbank prepaid cards.
• Provides in-depth analysis of several of the industry’s leading card brands, including cost, feature, and target audience analysis. Brands include Chase Liquid, Contour, Bluebird, the Walmart MoneyCard, PayPal Prepaid MasterCard, Walgreens Balance Financial Prepaid MasterCard and Western Union MoneyWise
• Explores prepaid card marketer & issuer strategies, focusing on card associations (American Express, MasterCard and Visa), marketers (Green Dot, NetSpend and Blackhawk Network) and issuers (the Bancorp Bank and MetaBank). Analysis includes competitive positioning, new product introductions, company innovations, and trended performance analysis.

SAMPLE INSIGHTS AND HIGHLIGHTS

·         Packaged Facts estimate that prepaid card transaction value will reach $274 billion in 2014, up 11% from 2013.

·         General-purpose (open-loop) prepaid cards, which overtook private label (closed-loop) prepaid cards in transaction value in 2011, continue to drive growth.

·         The retail distribution landscape is rather saturated, and gift card usage penetration rates have fallen during 2010-2014.

·         34% of gift card spend is for Christmas.

·         After lagging behind prepaid leaders GreenDot and NetSpend, major U.S. banks are making up for lost time.

·         The regulatory onus to reform an industry long criticized for high fees and agreements cloaked in ambiguity is very strong.  Driven in part by the prospect of regulatory intervention and in part by heightened competition, many leading prepaid card marketers are beating the CFPB to the punch.

·         The industry’s revenue generation models are being reshaped.

·         While activation and monthly fees are going down, technological innovation provides for the addition of a greater array of added-value services that can carry a fee.

·         Fee streamlining also means that interchange is becoming a more important revenue driver.

·         Given the short product use lifetimes, prepaid cards present unique challenges in building relationships between the provider and the user.

·         Thanks to the evolution of online and mobile technology, card loyalty is not garnered from the card itself, but from the features that increasingly surround it—the widening ecosystem through which the cardholder can engage easily with financial services products, services and educational tools.

·         Prepaid card users are not only ready for mobile payments, they are already leading users.

·         Prepaid card programs have taken the plunge into savings programs.

·         With terms like “underbanked” often thrown around without context, one could get the impression that prepaid card users are members of a large, undifferentiated mass. Prepaid marketers know this is not the case.

·         Loyalty rewards are finding their way into the prepaid card market.

·         More than 6 in 10 of Packaged Facts survey respondents say that the card they use the most has direct deposit.  Direct deposit has a pronounced effect on monthly card costs, usage frequency, and monthly spending volume.

·         18- to 34-year-olds are key prepaid card revenue drivers: they incur higher-than average costs spend more than average per month, and their transaction volume is also higher than average.

·         Cardholders with <$50K household incomes, often the intended prepaid card targets, report using the card less frequently than average.

·         The correlation between credit line loan usage and prepaid card usage strengthens among prepaid card holders who have either debit cards, credit cards or both.

·         By type, restaurants/ coffee shop gift cards are the most prevalently purchased, surpassing department/clothing/mall store gift cards.

·         While the general-purpose reloadable prepaid card market has historically been within the purview of Green Dot, NetSpend, The Bancorp Bank and MetaBank, the landscape is quickly changing, thanks to a host of market entrants.