Millions of adult-oriented online transactions are occurring all over the world with alternative billing methods, and one sector of alternative billing that continues to grow as 2013 winds down is prepaid or preloaded cards. Not all prepaid cards can be used for adult entertainment, and in many European countries, they still take a back seat to debiting. Nonetheless, prepaid cards are on the rise in many places — especially the U.S.
“At the moment, the U.S. is the biggest consumer of prepaid cards,” explained Judy Shalom, managing director for Affil4You. “While not all prepaid cards allow billing for adult or gambling products, the popularity of the prepaid cards is steadily increasing — also outside of the U.S. in markets such as Europe, Latin America and Russia.”
At the moment, the U.S. is the biggest consumer of prepaid cards, while not all prepaid cards allow billing for adult or gambling products, the popularity of the prepaid cards is steadily increasing. -Judy Shalom, managing director for Affil4You
Shalom added: “The market for prepaid cards is, along with m- and e-payments, one of the fastest growing non-cash payment markets out there. Most of the growth for this market is coming from the U.S., and most of the growth will come from the U.S. — as the bulk of it is already concentrated there and the prepaid card form of payment has been more successful there than in any other major market. The popularity of prepaid cards among consumers without bank accounts, combined with the extra budgetary control that prepaid cards give over debit cards, will continue to grow the popularity of the prepaid card compared to that of the debit card. Since 2009, the transaction volume for prepaid cards have grown by more than 20 percent, and are expected to reach 17 billion in 2014.”
When alternative billing experts are asked to discuss the advantages of prepaid cards, one word that still comes up a lot is “security.”
Clark Chambers, a business development specialist at the alternative billing-oriented 2000Charge, noted: “Primarily, users of prepaid cards look to this payment method to preserve some anonymity. A distinct advantage for the user is that they provide a safety measure against unscrupulous billing and also, overspending. There has always been a strong utilization of such cards among travelers—especially in Europe, where crossing borders might mean exchange fees, credit card fees, etc. Prepaids allow one to mitigate some of the unpleasantries credit cards offer.”
Chambers added: “Prior to the recession, I think most in the U.S. viewed prepaid cards as a tool for people with poor credit or less income. While that may be true to some extent, the current growth in this market shows that consumers are finding advantages in them as a financial management tool as well as security measure.”
Shalom said that while the popularity of prepaid cards will continue to increase, there is one disadvantage that users of prepaid cards still face: fees. “A common misconception among consumers is that prepaid cards are less expensive than debit cards,” said Shalom, who noted that prepaid cards can become expensive thanks to “all the basic fees for reloading, ATM withdrawals, monthly charges, opening or canceling an account. Combining all these costs, the average prepaid card can cost up to $300 per year in fees alone.”
Chambers pointed out that in some countries, cards in general are lagging behind as a payment method. But such countries, he stressed, also have major growth potential for prepaid cards. “The LATAM and BRIC countries would be categorized as lagging in the uptake of any plastic-based payment methods,” Chambers observed. “For example, U.S. businesses are clamoring to get into Brazil, the world’s seventh largest economy with 191 million people. One dominant billing method is a boleto, which translates to ticket or voucher. We’ve had great success by introducing our Pagos Bancarios payment option, which is a boleto option. This method requires the consumer to visit a bank or some markets, pay in cash in return for a boleto — which they remit online to the merchant, who is paid by the banks. We also provide access to a popular payment method in Russia called Qiwi. This is an e-wallet, with access online and from a large network of kiosks.”
Chambers continued: “The huge populations in these emerging markets is exactly why they are prime targets for alternative payments like prepaid cards. The market opportunity is enormous and is not being overlooked by the payments industry.”
