Digital prepaid cards, also referred to as e-gift cards and virtual prepaid cards, are gaining traction among American consumers. In fact, the list of reputable retailers that offer digital prepaid cards continues to grow.
At least one analyst group predicted $1.3 billion would be loaded onto digital prepaid cards in November and December of 2013, a four-fold increase year-over-year. One reason for this prediction was the shorter shopping season, which resulted in more online shopping. We’ll be on the lookout to see whether or not these predictions came to fruition.
Another significant reason consumers go for digital prepaid is instant delivery. Instant issuance is a key component of any successful prepaid offering.
Recent research from one prepaid product company found 67 percent of surveyed consumers have purchased a prepaid card online. The trend appears to see an uptick around the holidays, as 77 percent of respondents planned to buy at least one digital gift card during the holiday shopping season. Of those, 20 percent planned to buy more than five. Furthermore, 75 percent of survey participants say they are likely to buy at least one digital gift card in 2014.
Interest in purchasing digital gift cards has been increasing. Nearly 70 percent of respondents are much more interested in buying digital gift cards now than they were two to three years ago.
Naturally, convenience plays a significant role in consumers’ desire to purchase digital prepaid cards. The majority of those polled (62 percent) said the main reason they purchase digital gift cards is instant delivery. Others said it is because they are easier to send (42 percent), it is easier and quicker to make a purchase with them (32 percent) and they are easier to redeem (26 percent).
Tags: digital, online, Prepaid, retailer, shopping
A new study claims alternative payment methods, including e-wallets, mobile payments and bank transfers, are seeing growth worldwide. The study Your Global Guide to Alternative Payments by WorldPay predicts that online purchases made using alternative payment methods will increase to 59 percent by 2017.
E-wallet based payments, which totaled $295 billion in 2012, are set to rise five-fold to $1.6 trillion by 2017 and will garner a fair share of the alternative payments market.
Even so, a breakdown of the study’s numbers by country shows people worldwide still love their plastic. U.K. results show that British consumers mainly use cards to pay for goods and services (78 percent), with e-wallets the next most popular method (16.2 percent). PayPal handles 13 percent of these e-wallet transactions. In China, 44 percent of transactions are made using e-wallets, with Alipay handling the greatest market share at 30 percent of total payments.
Due to increased smartphone adoption and maturing technology, mobile payments, which stood at just $18 billion in 2012, will increase to $117 billion by 2017 the study says.
The report indicates merchants in the U.K. and U.S. are increasingly accepting new e-wallet products from traditional card providers such as V.me by Visa and MasterPass, both of which are available to financial institution clients of The Members Group (TMG). On a global level, solutions such as Alipay and PayPal continue to dominate the e-wallet market.
The use of cash is set to decline in coming years, the report predicts. In 2012, 5 percent of all payments were made by cash on delivery, but that’s expected to fall to 2 percent by 2017.
Kevin Dallas, WorldPay Chief Product and Marketing Officer, says the complexity in the payments landscape will most likely increase as emerging economies, including Brazil and India, have shown increased affinity toward alternative payments.
As the alternative payment platform continues to grow and evolve, financial institutions can take this opportunity to provide valuable education and guidance for navigating these ever-changing waters.
Tags: billion, digital, e wallets, growth, mobile, payments, the members group, TMG, worldwide
A study recently released by Mercator Advisory Group offers documentation and analysis of the growth and development of the prepaid cards industry. The Tenth Annual U.S. Prepaid Cards Market Forecasts, 2013–2016 provides an analysis of prepaid card load dollar volume, growth and market dynamics in the U.S payments system.
While the prepaid industry continues to grow, Mercator found the industry’s growth has slowed some due to economic instability and an uptick in legislative and regulatory activity related to the prepaid market. Even so, Mercator indicates there are prepaid segments that should see growth over the next four years.
Specifically, the latest report in Mercator’s CustomerMonitor Survey Series suggests that although prepaid growth may have slowed temporarily, consumers are using prepaid cards in more ways and in more places than ever before.
“The one observation that is safe to make is that companies and consumers continue to find new uses for prepaid technology, and that will drive growth in some segments and a movement of dollars between segments,” said the director of Mercator’s prepaid advisory service.
With growth expected to continue in the prepaid market, now is a good time for credit unions and community banks to add prepaid cards to their product offerings.
As pointed out in a January 2014 Credit Union Management article, there are a number of viable reasons for credit unions in particular to get into the prepaid market. Prepaid cards’ advantages, versatility and range of use continue to be the driving forces behind prepaid’s popularity.
Remember, prepaid doesn’t have to replace a debit card. For many consumers, it’s a complement to the other great payment options offered by their financial institution.
The CU Management article highlights a number of credit unions that have enjoyed measurable success with their prepaid offerings. Indeed, all community-based financial institutions should take the time to consider the potential benefits of providing prepaid cards.
Tags: card, companies, consumers, growth, market, mercator, Prepaid, Technology, volume, years
Mobile payments are on the rise. In fact, according to a recent report from European payment processor Adyen, mobile payments made up nearly 20 percent of all transactions worldwide in December 2013, a 55-percent increase from the 13-percent share measured in December 2012. Two billion of Adyen’s 14 billion transactions were made via mobile.
Adyen’s data indicates tablets and smartphones ended the year with almost equal shares of the global mobile transaction volume. In the U.S., tablets held a significant advantage over smartphones on both Thanksgiving / Black Friday and Cyber Monday. On Cyber Monday, tablets made up 12 percent of all online sales, more than twice the share of smartphones.
Adyen measured both volume and value of mobile payments in five industry verticals: travel, digital goods, gaming, retail and ticketing. The researchers found that for all verticals except retail, smartphone payments outweighed tablet payments in volume. However, tablets had a far higher average transaction value than smartphones and even PCs in the majority of cases.
Adoption of mobile devices for payments increased across all sectors. Travel has seen an annual increase of 22 percent, passing every other vertical with a nearly 30 percent share of all transactions made by smartphone or tablet.
In retail, mobile transaction volume has also increased by a third to 23 percent. Ticket purchases are up 12 percent to encompass 20 percent of all mobile transactions, and payments for digital goods are up 9 percent to make up 18 percent of all mobile transactions.
Apple devices continue to be the most popular mobile payments platform, Adyen finds. The iPad had the highest share of holiday shopping transactions in 2013, making up 41 percent of all mobile transactions from September to December. Second place, at 32 percent, went to the iPhone.
This report highlights the importance of payment providers continuing to strive to meet the needs of mobile payment users.
Overall, the statistics from Adyen’s report indicate mobile payment providers understand what consumers are looking for with regard to user preferences. As consumer interest in and use of mobile payments continues to grow, providers will need to adapt, adjusting their offerings to remain in line with these consumer expectations.
Tags: adyen, cash, mobile, payment, percent, smartphone, tablet, transactions, worldwide
Apple is making internal and external moves to expand its ability to handle mobile payments. According to a recent Wall Street Journal article, the company is seeking to build upon the hundreds of millions of credit cards stored on iTunes and the App Store, and upon the vast user base of iPhones and iPads.
Apple already allows consumers to pay for some products in Apple retail stores by scanning the item and paying with a credit card on file with iTunes, the Wall Street Journal reported. Apple’s fingerprint sensor, called TouchID, currently includes a basic mobile payments feature: the ability to pay for products on the iTunes and App Store without entering an account password. While that’s a limited use for now, there’s significant potential (and apparently interest) to expand where TouchID is used for payment.
“You can tell by looking at the demographics of our customers and the amount of commerce that goes through iOS devices versus the competition that it’s a big opportunity on the platform,” Apple CEO Tim Cook said in a recent earnings conference call.
As Brian Day, product manager for The Members Group (TMG), put it in a recent Credit Union Times article, Apple’s entrance into the mobile payments arena could mean both good and bad news for community financial institutions (FIs). While Apple’s participation in this evolving payment option may serve to substantiate mobile payments among some skeptical consumers, it could potentially result in diminished relationships for some FIs.
One reason for this result is that mobile wallet users often lose track of which credit card (some of which are offered by their credit union or community bank) they’ve entered as their chosen payment method for iTunes purchases. Combine this with the fact that the user’s primary relationship for these purchases is with Apple, not the credit card issuer, and it’s clear how credit unions might lose out. As Day explains it, “The [FI] would preserve its revenue from the transaction, but it might suffer brand erosion.”
It remains to be seen if Apple’s foray into mobile payments will lead consumers to view Apple as a principal financial provider. However, it’s becoming clear that the company does not intend to sit on the sidelines of this emerging payment space much longer.
Tags: app, apple, brand, brian day, credit card, financial institution, ipad, iPhone, mobile, relationships, TMG, touchid, users, wallet
What follows is an excerpt of an article that originally appeared on CUinsight
One study estimated that 50 percent of all U.S. financial institutions will have a prepaid option in their payments product suite in 2014. Our company alone experienced a 97-percent increase in the number of clients offering prepaid products between 2012 and 2013. That’s because credit unions and other financial institutions have recognized five distinct benefits of offering the products:
- Prepaid attracts new customers
- It’s an easy cross-sell
- Select Employee Groups and business partners also see potential in prepaid products
- Prepaid has built-in fraud protection
- The products generate much-needed revenue in three ways: retail, interchange and consumer-friendly fee income
For credit unions and community banks, prepaid products offer yet another way to help consumers achieve personal financial success. The budgeting, convenience and safety innate to the products attract more than the underbanked member (although this continues to be a powerful market from both a profit and philosophical standpoint).
Do you have thoughts on prepaid’s prospects for this year? If so, share your insight in the comments section below. More information is available in the recording of a webinar the TMG team recently put together. You can access it at themembersgroup.com/prepaid_2014.
Tags: 2014, community banks, credit unions, easy, financial institution, Fraud, market, payments, Prepaid, product, protection, underbanked
What follows is an excerpt of an article that originally appeared on CUinsight
Consumers are looking for more security in their daily transactions, particularly when it comes to transactions made with cards. Prepaid cards, however, offer additional security that is expected to increase their popularity this year.
Target, Neiman Marcus, Michaels – this list of retailer breach victims is expected to rise over the next several months and likely even years. Consumers are naturally nervous about paying with plastic that, once compromised, opens up their entire checking account to the bad guys. Prepaid cards, on the other hand, only expose loaded funds – which are able to be recouped in the case of confirmed fraud.
For financial institutions forced into reissue mode by card compromises, having an inventory of instant-issue prepaid cards on hand not only allows them to offer an immediate solution to impacted cardholders; it’s also an ideal way to get a new product directly in the hands of a consumer who may not otherwise have been exposed to the convenience, safety and user-friendliness of prepaid.
In my next blog, I’ll talk through the incentives financial institutions have to add prepaid products to their line-up, which is the third reason the cards will be hot this year.
Tags: breach, card, instant issue, plastic, Prepaid, security
What follows is an excerpt of an article that originally appeared on CUinsight
Even as new ways to pay bills and make purchases are springing up nearly every month, consumers continue to love their plastic. The average American consumer has several cards in his wallet where the collection is a mixture of credit and debit cards – and increasingly, reloadable prepaid cards.
MasterCard predicts the global prepaid opportunity to rise above $820 billion by 2017. Naturally, that’s attracting providers from all corners of the market to this hot plastic product. Evidence of this can already been seen in the entry of everyone from Walmart to Justin Bieber into the prepaid space.
Driving much of the predicted growth are three market forces. First, prepaid is gaining in popularity among mainstream consumers.
Just a few years ago, most of the talk around the value of prepaid to issuers was the ability to serve an entire population of consumers you may otherwise have to turn away. It was a value that resonated particularly with credit unions because they are in the business of helping people.
Today, however, we are seeing that prepaid is also of value to banked consumers. In fact, Pew Charitable Trust found that nearly 60 percent of prepaid cardholders also have at least one checking account. In an effort to round out the customer relationship, more credit unions and community banks will want to prevent members from turning to big box retailers—or worse, pop stars—for the financial tools they need.
In my next blog, I’ll talk through the added security prepaid products provide consumers, which is the second reason prepaid cards will be hot this year.
Tags: Cards, checking account, consumers, percent, popularity, Prepaid, reloadable, underbanked
The Federal Financial Institutions Examination Council (FFIEC) recently issued guidance titled “Social Media: Consumer Compliance Risk Management Guidance,” which applies to financial institutions (FIs) supervised by the new Consumer Financial Protection Bureau (CFPB).
Although the document does not impose any new regulatory requirements or duties on FIs, it does provide a road map for how existing regulations apply to FIs’ use of social media, including Facebook, Twitter and LinkedIn.
Where the increasingly ubiquitous realm of social media meets the highly regulated world of FIs, there was a need for the FFIEC to issue guidance to properly communicate its expectations. How FIs should assess the risks of using social media and how they can best craft policies to manage that risk are among the main points covered in the guidance.
The document states that a “financial institution should have a risk management program that allows it to measure, monitor and control the risks related to social media.” It also specifies the risk management program should provide guidance and training for employee use of social media.
A recent survey from Social Assurance indicates many FIs are already in the social media game, and are finding success using it as a marketing tool. Social Assurance tracked data from more than 3,000 FIs’ Facebook pages from July through September of 2013. During that period, Social Assurance recorded nearly 2 million interactions between FIs and consumers.
The majority of comments Facebook users sent to their FIs during the test period were positive. Of the negative comments recorded, Social Assurance found smaller FIs were the subject of fewer negative comments per capita. Social Assurance explains this is due in part to the fact that smaller FIs are less likely to be subjected to “mob” or “crowd-psychology,” which basically means negative comments beget more negative comments.
Also, not surprisingly, smaller FIs have higher positive “sentiment” ratings for their Facebook page activity. This is due in large part to the fact that community banks and credit unions can more easily inject a localized flavor to their social content. This is a significant disadvantage for larger FIs with branches scattered across the country.
The sheer number of interactions studied during the Social Assurance survey provides evidence that social media is an effective marketing tool for FIs who wish to reach large segments of their target audience. With the new FFIEC guidelines, FIs of all sizes can continue to manage their social media efforts as a useful, compliant and valuable means of engaging consumers.
A recent Credit Union National Association (CUNA) study has revealed the majority of U.S. consumers have made some sort of payment on a mobile device. The survey found ease of use of the technology to be a driving force behind mobile payment’s growing popularity, with 90 percent of individuals surveyed citing it as the most significant benefit.
Despite this payment option’s increased adoption, worries about the safety of making payments via a mobile device continue to remain high. In fact, security was the main concern for 77 percent of smartphone users questioned, regardless of whether they actually used their smartphones to make mobile payments.
Comparatively, the following factors presented much less of a concern for survey respondents: a device’s battery life (7 percent), confusing to use (6 percent), not enough rewards/bonus features (5 percent) and the inability to track a budget (4 percent).
“The fact that the overwhelming majority of smartphone users listed security as a top concern is a reminder to financial institutions (FIs) and others that offer mobile payments that users won’t sacrifice convenience for security,” said CUNA Executive Vice President Paul Gentile. He added, “While there have been many advances made with mobile security in recent years, respondents’ concerns over security indicate FIs and companies in the mobile space must continue to stress their focus on security with their customers.”
The survey data was also broken down by age groups. Those between 30 and 44 years old were found to be the largest group of mobile payment users, followed by 18- to 29-year-olds.
This survey’s findings provide a useful reminder of the importance of consumer perception of security, not only on mobile payment offerings, but also throughout the entire payment product suite. Keeping your customers informed of the security measures your FI offers, as well as the steps mobile payment users can take to protect their information, is be invaluable to consumer adoption of your mobile payments program.
Tags: concerns, mobile, payment, security, smartphone, surveyed, users