In recent times, prepaid cards have witnessed a surge in popularity. This is predominantly due to the fact that people around the world are increasingly moving away from traditional methods towards more convenient cashless transactions. In fact, According to a report published by Allied Market Research, Countries such as Japan, China, and India dominated the global prepaid card market in the Asia-Pacific region during 2015-2016. India is one of the emerging markets in the Asia-Pacific prepaid card market and accounts for 8.0 per cent of the market. It is estimated to register the highest CAGR of around 37.2 per cent from 2016 to 2022. With the emergence of newer applications and growing consumer awareness of its benefits, undoubtedly, prepaid cards are here to stay. Here is a quick lowdown to the world of prepaid cards.
The most common types of prepaid cards are the gift cards, travel cards and payroll cards. Gift cards are a phenomenon that has seen rapid adoption by users across the globe. Most leading brands, retailers, hotels and online brands have launched their robust gift card portfolio to enable customers to have a smart means to shop and gift. Gift cards are ideal when faced with the dilemma of choosing a gift.
It also gives the receiver the freedom to redeem it against what they want. Gift cards are growing in popularity across categories like fashion, department stores, electronics, books, entertainment, toys, travel, grocery, hospitality etc. Experiential gifting too has seen increased adoption.
Similar to credit and debit cards, prepaid cards can be safely and securely used to buy goods and services without the hassle of cash transactions. You can spend the value that is in the card at any time during the validity specified. A definite amount is preloaded to the card and extra funds can be added to certain reloadable cards until the card validity expires.
Travel cards are transactional cards, which can be used to withdraw money from domestic and international ATMs and make purchases at retail outlets. Travel cards can be utilised within one's home country or abroad and can be loaded with the required currency. Going on an overseas trip? Most people would carry cash, travellers' cheques or even use their credit or debit cards. Prepaid forex cards offered by several banks make it possible for you to now travel without carrying any cash at all.
Though it comes with added costs, a big advantage is that you can load up to 10 different currencies on some cards, eliminating the hassle of carrying multiple currencies in cash. It also helps you plan your expenses and avoid splurging. There are also prepaid telephone cards that can be purchased before leaving on a trip.
At the business and corporate level, prepaid gift cards offer flexible and cost-effective benefits as they act as a tool for increased customer engagement, a way of paying employee bonuses or incentives, tracking and reimbursement of employee expenses. Companies can even use prepaid payroll cards to pay salaries to employees who do not have a bank account. An alternative to cash, cheques and credit/debit cards, prepaid cards are being widely used in easing everyday financial transactions like paying bills, withdrawing money from an ATM and shopping online.
Prepaid Gift cards need not be linked to a bank account, thereby increasing adoption across the unbanked too. With rising internet threats, bank accounts are exposed to fraud and hacking. Prepaid cards offer a safe haven, where you can simply load the required amount onto the card and use it across your chosen favourite merchants and brands.
A nascent phenomenon in India, protection and legal recourse terms for prepaid cards are intended to be more favourable to users and consumers going forward. The Prepaid cards must be verified and purchased from genuinely operating merchants, offline or online providers and recognised financial or non-banking financial institutions.
Certain cards come with allied costs and additional charges. Ask for clarity on the terms and conditions before buying these cards. Lastly, it is important to pay heed to where these cards can be used and their validity period.
Prepaid cards offer significant convenience, savings, benefits and joy and consumers are quickly beginning to see merit in them. From budgeting and controlling individual expenses to building large scale corporate programs, prepaid cards are a multi-faceted tool, opening a new world of smart financial opportunities.
(The author is Co-founder and Director, Qwikcilver Solutions)