Strategic Finance
Using prepaid to boost business |
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| Strategic Finance | |
| Written by Matthew Lanford, Head of Prepaid, MasterCard Europe | |
| Thursday, 26 August 2010 | |
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Fast-growing prepaid card sector presents multiple opportunities for business. As the UK economy begins a slow climb back to growth, many businesses will be keeping a close eye on spending and will continue to look for the efficiencies that will help them return to and maintain profits. Many companies, small and large, are also however realising the marketing and customer retention benefits prepaid cards can bring and want to be part of a sector with huge potential. Recent research commissioned by MasterCard Worldwide predicts that the value of the European open loop prepaid card market is expected to see an average annual increase of 26 per cent between now and 2017, with business applications being a major growth area. The corporate market is expected to be worth $15bn (€12bn) across Europe by 2017. Prepaid cards offer a range of benefits to businesses. They can help improve efficiency in internal financial processes such as payroll, cash management and reward schemes. They are also developing into an important marketing tool however, providing important linkages between brand-building, customer data capture and increasing sales online. If you employ a high number of temporary, seasonal or consultant workers, for example, prepaid can offer the perfect, paperless, solution for paying these workers who are only employed on short-term contracts. The research suggests that the use of prepaid as a means of paying salaries will increase by 36 per cent each year to reach €9bn, primarily driven by take up by UK and Italian organisations. Prepaid is also helping businesses to limit their financial risks by giving them far greater control over their employees’ expenses. Rather than giving out corporate credit or debit cards, prepaid cards allow businesses to control when, where and, most importantly, how much their employees spend. Many employees say that they prefer receiving prepaid cards rather than traditional flower and champagne gifts as rewards for hard work. The HSBC Shine Card is one example of this and is given out to managers to enable them to buy gifts for individuals and teams as a thank you for outstanding performance. But prepaid cards are not just about keeping costs down, they are also helping businesses to grow, particularly in retail. They provide an opportunity for a brand to become a constant presence in the consumer’s wallet allowing them to reap the benefits of cashless transactions without the worry of getting into unsustainable levels of debt. Online shopping by prepaid cards allows businesses to access customers who may not have debit or credit cards. They can also attract online consumers who can be put off making purchases owing to fears over fraud. By becoming the a consumers online card of choice, successful brands can potentially become associated with every online purchase a consumer makes. These types of card can also provide an additional level of consumer spending behaviour information not available via gift card or loyalty card programmes There is still huge potential for prepaid cards as businesses discover more and more innovative uses for them. Consumers are willing to pay for added value services. This is already happening in the consumer gift card arena, with the MasterCard Personalised Gift Card, by which consumers can upload their own images onto a card to give as a present. The future may include prepaid cards targeted at specific niche audiences with particular benefits for their lifestyles and purchasing characteristics. In the UK, 36 per cent of consumer respondents affirmed they would be likely to purchase a youth card during the forthcoming 12 months for example. In the UK, the use of cash has gone up only 7 per cent in the last decade, while consumer spending has doubled, and the Payment Council’s latest report predicts that while cash is currently used in 60 per cent of UK payment transactions it will be used in less than half (48 per cent) a decade from now . The future for prepaid cards is bright, it is the smart business that becomes an early adopter and can be part of developing this exciting technology. |
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