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The Green Sheet Online Edition

January 25, 2010 • Issue 10:01:02

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Mercator benchmarks health of the industry

Many prepaid card markets continue to show steady growth despite the travails of the economy, according to Mercator Advisory Group research. While growth of the industry stalwart - the closed-loop, in-store gift card market - slowed down, such categories as consumer incentives, payroll and government payments experienced double-digit growth, Mercator said.

Mercator's Sixth Annual Prepaid Benchmark, showcased in a webinar entitled A Bright Spot in a Down Economy, is based on data collected from prepaid card issuers and processors in mid-2009 and then compared to the previous year's results, said Tim Sloane, Director of Mercator's Prepaid Advisory Service.

The data represents the amount of dollars loaded on the various prepaid card instruments as opposed to the amount of money spent using the cards. For purposes of research and analysis, Mercator breaks down the over- all prepaid card market into 33 segments and divides the segments into two categories: closed-loop and openloop cards.

Closed-loop top performers

In the closed-loop category, Sloane highlighted that:

  • Consumer incentives grew 19 percent ($4.8 billion loaded).
  • Digital media grew 24 percent ($4.7 billion).
  • Games and ring tones grew 17 percent ($3.3 billion).
  • Distributed gift cards (in-store gift cards distributed through prepaid malls) grew almost 22 percent ($6.1 billion).
  • Petroleum industry (gas cards) grew 23 percent ($1.7 billion).
  • Transit grew 11 percent ($2.5 billion).

The one downside is the slowdown of the in-store gift card market (cards not sold in prepaid card malls) to 1.8 percent growth.

Open-loop top performers

In the open-loop category, Sloane noted that:

  • Open gift (Visa Inc.- or MasterCard Worldwide-branded cards) grew 54 percent ($7.7 billion loaded).
  • Payroll grew 26 percent ($17.2 billion).
  • Court-ordered payments grew 64 percent ($3.37 billion).

The one anomaly in the open-loop category was Social Security payments, which grew by a whopping 11,000 percent ($1.2 billion loaded). Sloane explained that Social Security payments, one of the newer categories, began as a small, government-level pilot program that was then expanded into full-blown use, which accounted for the large percentage increase.

Gift card mall primacy

One point Sloane drove home was the importance of the gift card mall to the growth of the industry. It is a primary distribution channel for prepaid cards. In a survey of gift card mall operators, Mercator found that of the $8.7 billion loaded onto general purpose reloadable cards, almost $2 billion was loaded on cards sold through gift card malls. "It clearly demonstrates, I think, how rapidly a barometer of the industry the prepaid mall industry has become as a driver of convenience and volume for consumer-purchased prepaid products," Sloane said.

Going forward, how well the industry understands the gift card mall as a distribution hub and takes advantage of its marketing and promotional aspects will be "critical to moving the dial and continuing to maintain growth across the segments," Sloane added.


For more stories from SellingPrepaid E-Magazine, as well as breaking news and forums devoted to the prepaid sphere, please visit greensheet.com. end of article

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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