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.
In the closed-loop category, Sloane highlighted that:
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.
In the open-loop category, Sloane noted that:
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.
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.
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