Research says prepaid simplifies m-wallet ecosystem

Prepaid cards have been touted as a better fit for mobile wallets than credit or debit cards. It is argued that prepaid provides a more straightforward payment process by pre-funding accounts used for purchases made with mobile devices. In The Prepaid Mobile Wallet: Taking Prepaid into Account, U.K.-based mobile financial services association Mobey Forum said prepaid has the potential to dramatically simplify mobile wallet payments.

Part of that simplification involves merchants, mobile operators and other influential mobile wallet stakeholders, such as Google Inc. and the American Express Co., choosing prepaid as a way to provide financial services outside the traditional banking system.

“Some stakeholders are actively using prepaid as their transactional model of choice in order to sidestep the traditional banking system entirely, open up new engagement channels with their customers and, displace banks from their traditional role as 'guardians of commerce' in the mobile world,” the paper said. ”Already, there is strong evidence in the ecosystem to support this suggestion.”

Another factor is that large swaths of consumers who have no access to traditional bank accounts, but more often than not use some form of smart mobile device, can access financial services via prepaid cards. “For demographics that struggle to get access to the traditional financial system, due to factors such as job security or financial hardship, prepaid cards, which require no credit checks to be issued, can offer many of the benefits of a traditional bank account,” Mobey Forum said.

Moving up market

The association’s report, which is the last installment in a six-part series of white papers on the mobile wallet ecosystem, also detailed the benefits of prepaid for mobile payment providers. Prepaid mobile services are cost effective for providers, according to the report. The prepaid infrastructure can be “administered at a significantly lower cost than that of a traditional banking system; this is self evident in the commercial viability of the prepaid business models serving this [unbanked] market,” the association noted.

There is also evidence that prepaid mobile providers are now targeting the successfully banked. Mobey Forum cited payment app developer Movencorp Inc. as one firm that is challenging traditional banks by going after their customers.

“With sophisticated and flexible prepaid platforms already developed and deployed, a significant opportunity now exists for prepaid providers to take their services to mainstream mobile consumers and compete directly with banks in the market for current accounts and related services,” the association said. ”Until now, however, the banked consumer has lacked a sufficiently motivating incentive to entertain the idea of abandoning their bank in favour of a ‘new breed’ of prepaid service provider. The attraction of an integrated, value added prepaid mobile wallet may well provide this incentive.”

Mobey Forum concluded that prepaid's success to date is just the beginning of a convergence trend between prepaid and mobile “that will propel both prepaid and the mobile wallet / mobile commerce industry forward at pace.”

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