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All 33 segments of the prepaid market operate in a significantly different environment. As a result, each faces unique circumstances. But a new report from Mercator Advisory Group, The Resilient Nature of Prepaid: A Bright Spot in a Down Economy, found that 18 of the 33 segments will see positive growth, seven are likely to see negative growth and eight will either be neutral or too difficult to assess.
The report said that open-loop gift cards are performing better in 2009 than in previous years. The digital content, online games and prepaid handsets segments have all done well despite the recession. Highlights of the report include a review of spending on credit and debit cards, shifts in spending habits and new consumer behaviors related to prepaid purchases.
Prepaid malls continue to be a bright spot in the market. Retail stores nationwide have reported sales volume down by as much as 30 percent, but gift card sales were only off approximately 6 percent compared to 2008 totals. Transit has also seen tremendous growth, primarily due to increased fuel costs.
"It is understandable that many have focused on the challenges facing the prepaid industry solely on the downturn in consumer purchases, but to do this shows a lack of awareness regarding the power of channel development," said Tim Sloane, Vice President of Client Services and Director of Mercator's Prepaid Advisory Service.
"Any sales channel can become saturated, but a growing number of leading merchants are now recognizing the critical need to establish gift cards that will be highly differentiated within each channel to experience the highest potential for growth," Sloane added.
A TowerGroup report entitled, After Boom and Bust: Navigating the Credit Card Industry into the Next Economic Cycle, concludes that business models for predicting changes in behavior and economic stress failed to protect credit card issuers from the recession that began in 2008, and their business assumptions are untested for the economy that will ensue.
The report said that, although the credit card model is under stress, the payments industry continues to flourish in the prepaid and debit card arenas - the transaction products into which card issuers should channel risky accounts. Because of its size, with nearly $1 trillion in revolving credit, the industry will take time to change its business model, but it is essential to begin planning for the recovery phase of the economic cycle, the report said. Topics covered in the report include:
Payment solutions firm Vesta Corp. released the results of an independent research study conducted by telecom consultancy Northstream AB indicating how an effective prepaid top-up (reload) strategy can deliver significant value to the prepaid mobile market. The study, based on mobile phone operator interviews, showed implementation of a direct operator top-up strategy can bring double digit revenue gains and reduced costs.
Direct operator top-up channels include those that rely on electronic transactions outside retail environments, such as the operator's Web site, interactive voice response systems and handset applications.
The research indicates that advantages of the direct operator prepaid top-up strategy include improved performance metrics and customer relationship management capabilities, as well as lower costs. Direct handset top-up also has the ability to remove the fragmentation and complexity impacting mobile payment services and drive new revenue streams for operators.
Digital payment solutions firm Ezic Inc. added Stepdown Rebilling features to its recurring billing system. Stepdown enables merchants to automatically retry declined recurring billing transactions for discounted amounts.
With Stepdown, merchants choose the number of retries for each transaction, the frequency of retries and the discount amount attempted for each consecutive retry. Discounts are determined by the merchant on a percentage or fixed dollar amount.
Prepaid and credit card processing technology company CoreCard Software now offers CoreIssue-Fleet and CoreAcquire-Fleet to provide its customers with customized, cost-effective solutions for electronic processing. The Fleet solutions give acquirers, issuers, and processors worldwide advanced, real-time technology for end-to-end fleet card management, according to CoreCard.
Prepaid and postpaid solutions company iPayStation LLC released version 1.1 of its terminal software for the new Linux-based terminal series from Dejavoo Systems. Dejavoo connects iPayStation terminals to the back office for real-time reporting, new services, and terminal or simple message service messages.
Prepaid and debit card solutions provider Metavante Technologies Ltd. implemented MasterCard rePower, the European POS reload service for MasterCard Europe and Maestro prepaid cards.
Mobile money company Mi-Pay was certified by the International Tree Foundation as part of a carbon emission offsetting initiative sponsored by its hosting services provider Rackspace. Mi-Pay's centralized data center is now carbon neutral, reflecting Mi-Pay's increasing desire for environmentally conscious solutions.
Convenience store operator Sheetz Inc. reported it will offer First Data Corp.'s GO-Tag payment technology solution to allow its consumers to make purchases by tapping stickers on contactless readers. Sheetz said it will offer GO-Tags at all of its 350 locations across the United States by the end of July 2009.
One World Ventures Inc. released the One World Prepaid Card, a Visa Inc. and MasterCard Worldwide remittance solution for emerging markets.
One World's objective is to serve the underbanked by providing prepaid solutions that enable the same benefits belonging to credit and debit card holders.
Prepaid debit card and payment solutions provider PreCash Inc. reported that its Chairman and Chief Executive Officer John Chaney received the Ernst & Young Global Ltd.'s Entrepreneur of the Year Award in the financial services category in the Houston and Gulf Coast area. Chaney, selected by an independent panel of judges, is now eligible for the national Entrepreneur of the Year award.
Prepaid debit card provider TransCard LLC has integrated Discover Financial Service's Pulse network to provide its cardholders with more places to use prepaid cards. The Pulse ATM and debit network comprises more than 289,000 ATMs and POS terminals; it is reportedly used by more than 4,500 financial institutions across the United States.
Payment processor TSYS extended its agreement with Toyota Finance Inc. to include prepaid card payment and processing services. Toyota's Tressa Style Card Plus is a rewards card that can facilitate transactions as either prepaid or QUICPay contactless card payments. The card will be issued to consumers at the Tressa Yokohama shopping mall in Yokohama City, Japan.
Prepaid solutions provider VIPGift LLC received Level 1 Payment Card Industry (PCI) Data Security Standard (DSS) certification for its loyalty and incentive programs, as well as its payment gateways. Visa also designated the VIPGift as a Cardholder Information Security Program PCI DSS service provider.
The Western Union Co. launched the Digital Vendor Program to extend the accessibility of Western Union Money Transfer services to mobile finance initiatives in Latin America, Africa, the Middle East and Asia. The first providers to join the certification program are four mobile platform providers: South-Africa-based Fundamo Pty Ltd., India-based mChek India Payment Systems Pvt. Ltd., U.S.-based Sybase 365 and Singapore-based Utiba Pte Ltd.
Continental Prison Systems Inc., a provider of EZ-Card & Kiosk technology for cashless solutions in jails, formed an alliance with FSH Telecom to install three kiosks and implement the EZ Release Card at the Pima County Jail in Tucson, Ariz. The kiosks, intended to provide work-release inmates with prepaid cards instead of cash, can accept and load employers' checks, money orders, credit and debit transactions, and cash.
Metavante Corp. reported that the smartOne Prepaid Solutions division of First National Bank of Omaha renewed its card processing agreement. The smartOne portfolio includes payroll, reward and incentive, and corporate disbursement (travel expenses and relocation funds) prepaid cards.
Bucharest, Romania-based Raiffeisen Bank and RêvEurope launched the Raiffeisen Bank Visa Prepaid Card - reportedly the first prepaid debit card on the Romanian market issued by a bank and the only prepaid card that enables Romanians to send money domestically from their mobile phones. Customers can make purchases with the card anywhere Visa debit cards are accepted, withdraw cash from ATMs, and send money domestically to friends and family. In other news, RêvEurope was recognized by Cards International as the "most promising new entrant" for its underbanked card and payment solutions.
Foreign exchange services company Travelex Ltd. launched its dynamic currency conversion (DCC) technology, Currency Select, in Japan in conjunction with UC Card Co. Ltd. This is said to be the first time DCC has been available in Japan.
Online horse racing and betting Web company Youbet.com Inc. signed an agreement with Green Dot Corp. to enable its customers to go into one of 50,000 retail locations in the United States and convert physical cash into electronic cash using a MoneyPak reloadable prepaid card. Funds from the card can then be transferred directly into an existing Youbet Express account on the Youbet ADW (advance deposit wagering) platform.
Mobile debit card solutions company Veritec Inc. said its subsidiary Veritec Financial Systems Inc. entered into a license and maintenance agreement for its mobile banking and payment platform with Security First Bank of Fresno, Calif. Security First Bank will issue debit and prepaid cards on VTFS' platform; additionally, VTFS will provide back-end card processing services to the bank for all cardholder transactions.
Third-party credit card services provider Total Card Inc., in partnership with R&P Group Executive Search Firm, added Doug Bobenhouse to Total Card's staff as Director of the newly formed Prepaid and Debit Card division. Bobenhouse's responsibilities include new product development, company branding and the development of incentive, loyalty and rewards programs.
Western Union named John T. Brennan as its new Vice President, Business Development, The Americas, to focus on the U.S. banking channel. Brennan brings 25 years of experience in developing banking products and services in the payments industry.
Prepaid card program management and processing services provider FSV Payment Services Inc. appointed Richard "Rick" Savard to the company's board of directors. From 2004 to 2008, Savard served as NetSpend Corp.'s CEO.
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