As part of Retail Banking Research's Payment Cards Western Europe 2010 report, RBR tracked the development of the European prepaid card industry. While prepaid cards represent only a fraction of total card payments in the area, it is an industry on an overall upward trend, RBR said.
According to Chris Herbert, Project Manager at RBR, 866 million payment cards were in circulation in 2008 in the 17 Western European countries surveyed. Of that total, 9 million were prepaid cards. In 2008, 33 billion electronic transactions were made, with 21 billion using debit and prepaid cards, for a total value of just over 1 trillion euros, Herbert said.
According to the RBR study, the leader in prepaid is clearly Italy, where 90 percent of prepaid cards in the region exist - roughly 8.2 million cards, or 9 percent of the total number of cards in the country. RBR said the total number of payment cards in Italy grew 16 percent between 2007 and 2008, with much of that growth driven by prepaid card adoption. Herbert cites several reasons for this phenomenon.
"One of them is security," he said. "It's an issue in Italy for people feeling comfortable using payment cards, and it has been suggested by banks in Italy that people feel more comfortable using prepaid."
Another factor is that paying for purchases with cash is preferred in Italy, as opposed to credit. Using prepaid cards as a cash equivalent has become habitual for Italian cardholders, Herbert noted. Additionally, prepaid cards have been marketed toward a younger demographic: individuals who traditionally lack incomes and bank accounts, he said.
Sixty percent of prepaid cards in Italy are issued by the Italian postal system, Poste Italiane, which allows for easy distribution and top-ups (reloads), according to Herbert. Of the other countries surveyed, Herbert believes Greece might hold the greatest potential for prepaid card expansion. "It's another country where debit cards are typically used for cash withdrawal rather than payment at the point of sale. A bit like in Italy, the fact [is] that people think that prepaid cards offer more security than mainstream debit cards," he said.
General purpose, network-branded, reloadable cards are getting the most attention in the region, Herbert said. But another product with great potential is the payroll card, whereby employers can help employees control spending, Herbert said. But he added that the payroll card market is still in "the very early stages."
Herbert predicts prepaid card growth in all of the countries RBR analyzed, but slightly lower potential in Denmark, Finland, Norway and Sweden, where consumers are comfortable with debit card use, even for low-value purchases. "They all rank below average in the region for the average value of a card payment," Herbert said. "Prepaid cards would therefore appear not to have the same potential as an alternative to cash in these countries as they do in markets such as Italy and Greece."
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