DIGITALISATION ~ THE FUTURE

OF PREPAID CARDS

Whitepaper

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 DIGITALISATION ~ THE FUTURE OF PREPAID CARDS
1.1 Introduction
The payments sector has experienced strong growth in recent years. New payment
methods and innovative technologies have been adapted, as we increasingly move
towards a cashless society. As this trend continues, current players and payment
solution providers in the industry will also need to adapt to these changes. This will
include companies who operate in the prepaid cards space as well.
Prepaid cards are a well-established technology and have been part of the payments
market since the 1970s. Even so, there have been continuous developments and
interest in this area. This whitepaper will analyse the market landscape and the key
trends in the space.
1.1.1 Definitions
In order to avoid confusion throughout this whitepaper, we will start with a definition
of the market. Juniper Research defines a prepaid card as:
‘Any payment card that has to be loaded with funds prior to
use. Prepaid cards are differentiated from traditional gift
cards by having the same technical capabilities and basis as
debit cards and credit cards, and can be reloadable or able
to be restricted to certain use cases.’
While this precludes many gift cards, the trend in the gift cards area sees them
increasingly moving towards a payment card-based approach. By doing so, there will
be growing alignment between gift cards and prepaid cards.
In our definition, we do not differentiate between physical and virtual cards – a
prepaid card can be issued digitally or physically, and both types are valid (and
assessed within this report and the accompanying forecast).
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There is a notable difference between closed-loop versus open-loop cards. The
definitions are included below.
• Closed Loop: This is where cards are restricted to use in certain stores or merchant
categories.
• Open Loop: This is where cards are unrestricted and can be used at any place
where cards are accepted.
1.2 Current Market Landscape
Prepaid cards play an important role in the payments markets landscape and they
provide a key function across a number of areas such as payment capabilities for
underbanked and unbanked users.
The background of prepaid cards is important here to provide perspective. Prepaid
cards’ development proceeded the rise of debit and credit cards. Prepaid cards were
initially used as a payment method to replace coins used in phone boxes, reducing
the need for customers to have a large amount of coins at hand to make
international phone calls.
In the 1980s, closed-loop cards were introduced and adoption spread quickly. Stores
began to offer more gift card options and this aided the emergence of the
general-use prepaid cards market. By the 1990s, open-loop cards became more
prominent. Several European states replaced food stamps with a prepaid card that
could be used at a range of stores; allowing consumers to load a prepaid card
without a bank account.
The rise in popularity of prepaid cards can also be attributed as a response to the
expanding card payments sector. As credit card usage exploded, there was a
demand from consumers who wanted the finality of traditional physical money; once
they spent the amount they had, access to more funds was not immediately
available.
Retail has traditionally been an important segment for prepaid cards, with prepaid
cards being offered off-the-shelf in large retailers; providing a way for the unbanked
to access card payments. Prepaid cards have performed the strongest in markets
 DIGITALISATION ~ THE FUTURE OF PREPAID CARDS
such as the US and China, where they can be heavily leveraged to improve elements
like access to digital payments.
There are many different types of prepaid cards available in the market. We have
explored three major distinctions within prepaid cards available in the market in the
section below.
1.2.1 Open-loop Versus Closed-loop Cards
Currently, both open-loop and closed-loop cards are in circulation and utilised for
different use cases. Open-loop cards are commonly used for travel and retail use
cases. They are also popular for the underbanked and unbanked population because
of their flexibility. Closed-loop cards are gradually replacing specific types of cards,
such as fuel cards or other corporate cards.
The use of closed loops is generally restricted to specific merchant types. This is
enabled by the card network and its back-end system. As such, card networks play an
integral role in the functionality of a closed-loop prepaid card.
Both card types have their own markets and use cases. Some will require a restricted
function, whilst some will need to be open and flexible for its end users. This means
that both cards will continue to coexist, and there are opportunities regardless of the
card type. Juniper Research does anticipate, however, that closed-loop cards will
have a higher growth ceiling, due to their ability to be an extension of gift cards and
loyalty schemes for brands.
1.2.2 Physical Versus Virtual Cards
Until recently, physical cards were the only method through which a card could be
offered and issued. The rise of digitalisation, online payments for eCommerce and
the use of digital wallets has changed the landscape rapidly, with virtual cards
gaining more popularity due to the advantages it can bring.
Virtual prepaid cards are electronically produced and delivered. Virtual cards can be
single use, for a specific transaction, or reusable. They can be used either online
using details generated, or in-store via a smartphone’s contactless payments
capabilities. Many companies which offer a virtual prepaid card also have an
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integration function with wallet apps such as Apple Pay, Google Pay or PayPal for
greater convenience.
Virtual cards have vast potential for growth within the prepaids space through their
cost advantage and scalability. Relative to physical cards, their costs can be lower for
card issuers. Since the card is issued digitally and there is no need for a physical
option, issuance costs can be lower and the card can be issued more quickly. This will
also be useful for use cases where scalability is a priority, eg government
disbursements.
Virtual cards can also be much easier to manage at scale for businesses, not only
governments, particularly when looking at procurement and expenses. Virtual cards
generally have management platforms which allows companies to control their
spending limits, amount put on prepaid cards and restrictions to spending at certain
merchants etc. This is a key requirement that will reduce both cost and time spent
leveraging prepaid cards in a corporate context.
However, one of the disadvantages that virtual cards have compared to physical
cards is that virtual cards require the user to have a smart device. If the user does
not have access to a smartphone, then they cannot use their virtual prepaid card.
Given that not all users will have a smartphone, virtual cards can never be the
complete solution, and physical cards will still be useful.
1.2.3 Single-use Versus Reloadable Cards
Another key distinction in the prepaid cards market is the difference between
single-use cards and reloadable cards. Figure 1 shows the differences between these
two models in practice.
Historically, many prepaid cards have similar characteristics to an airtime top-up; a
user can top up their card using cash in a retail environment then use their account
balance. However, this has not always been the case, with many cards, particularly in
the corporate world, being preloaded with a certain amount then being discarded.
However, recent developments of digital services such as direct deposit in the US,
have changed this, and it is now more common to have cards that are reloadable.
Under direct deposit, workers can load their prepaid card directly through their
 DIGITALISATION ~ THE FUTURE OF PREPAID CARDS
wages. This is highly useful and convenient for underbanked and unbanked workers,
as they can access their income even if they do not have access to traditional
financial services. Apps also offer the ability for users to reload their cards digitally,
without needing to go to a retailer and use cash.
Figure 1: Prepaid – Single-use Versus Reloadable
Source: Juniper Research
1.3 Opportunities in Serving Underbanked and Unbanked Population
Prepaid cards are particularly appealing to those who are underserved by banks or
those who may not have access to traditional financial services. Therefore, the
underbanked and unbanked population presents a significant opportunity for
prepaid card vendors.
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For people in this segment, being unbanked/underbanked can be inconvenient and
costly. They face higher fees for everyday financial services, such as check cashing
and money orders, as well as higher interest rates on loans.
This illustrates the potential of the unbanked and underbanked users in the context
of prepaid cards. Prepaid cards are highly appealing for this target market and are
much more likely to adopt the card for everyday usage than someone who has
access to banking. This represents a significant opportunity for prepaid card vendors
to take advantage of, demonstrating a large potential user base across all
demographics and locations, with a need for services that a prepaid card can
provide.
1.4 Prepaid Cards & Fraud
One of the major advantages of prepaid cards is the security of personal data it
offers to its users. General prepaid cards provide consumers with a method of
replacing card details regularly without incurring large charges from their bank/credit
card providers. In most cases, a prepaid card can be used without any specific
banking data, user data or financial history of the user. As such, any theft of
information is likely to be minimal which makes the card very secure from a privacy
point of view.
Due to the unique characteristics of prepaid cards, criminals will look to exploit its
vulnerabilities, and crimes may continue to arise in the future. Therefore, financial
institutions will need to make sure they remain vigilant in order to prevent and
detect money laundering activities involving prepaid cards through their AML
procedures.
The digitalisation of prepaid cards will have a significant impact on fraud within the
space. When prepaid cards are issued or topped up digitally, digital identity
verification can be used as a strategy. Leveraging digital tools, such as identify
verification through selfie scan versus a government-issued identity document, can
significantly improve fraud detection.
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Although certain features of prepaid cards make them vulnerable to fraudulent

activity, measures can be implemented to significantly reduce the risk of using
prepaid cards for illegitimate means.

Financial institutions have a lot of control when it comes to managing the capabilities
of a prepaid card. For example, a card issuer can set deposit and spending limits or
restrict the number of transactions each day, to help monitor suspicious activity on
the card. For retailers, they can look to verify a customer’s identity before allowing
them to make a large purchase. Walmart, for example, requires customers to show
identification for gift card purchases over $5,000. Whilst CVS Pharmacy has an even
lower threshold for this and will not allow customers to buy more than $2,000 worth
of gift cards in a single day. These measures will mean money laundering activities
through prepaid cards will be inefficient, and criminals who attempt to do this at
scale will be vulnerable to law enforcement’s attention.

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1.5 Market Forecast Summary: Total Value of Digital Prepaid Card Figure 2: Total Value of Digital Prepaid Card Transactions in 2028 ($m): $3.98 Trillion
Transactions

The value of digital prepaid card transactions will exceed $3.98 trillion globally by
2028, up from $528.7 billion in 2023, an increase of 650% over the next five years.

By 2028, the value of digital prepaid card transactions will represent just under 60%
of total prepaid cards spend, up from 15% in 2023, demonstrating the rapid growth
of digitisation. It also reflects the greater use of digitally issued open-loop prepaid
cards as loyalty rewards; replacing more traditional gift cards. Open-loop systems,
where payments can be made anywhere cards are accepted, will lead to an
increasingly blurred line between prepaid cards and gift cards. This will make the
much wider loyalty market increasingly addressable for prepaid card vendors,
compared with the closed-loop system, where payments can only be made at specific
vendors.

• The number of prepaid cards issued digitally is expected to surpass 940 million by
2028.

• Prepaid cards are highly appealing to the unbanked; offering the functionality of
payment cards without the need of an account with a financial institution. North America Latin America West Europe
Financial inclusion remains a key issue for the millions of unbanked and Central & East Europe Far East & China Indian Subcontinent
underbanked across the world. However, advances in digitalisation, smartphone
availability, and the ease with which vendors can now issue prepaid cards digitally Rest of Asia Pacific Africa & Middle East
and instantly, mean that financial inclusion is within near reach of a growing number
of users. Source: Juniper Research

Financial inclusion use cases can significantly accelerate the success of prepaid cards,
but vendors must keep the costs very low to ensure prepaid cards remain
competitive for these use cases versus mobile money apps or central bank digital
currencies.

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 DIGITALISATION ~ THE FUTURE OF PREPAID CARDS
Order the Full Research
Discover essential coverage of key trends for the dynamic prepaid market in this
latest report; featuring key use cases in the future. Revealing an extensive vendor
analysis, this new forecast differentiates the physical and digital market, also
positioning 21 key market players in the Juniper Research Competitor Leaderboard;
providing an invaluable resource for stakeholders seeking to understand the
competitive landscape in this highly varied and complex market.
Key Features
• Market Dynamics: Provides a detailed assessment of market drivers and the key
market trends within the market, as well as an in-depth evaluation of the future
growth of the market and readiness for further disruption. This enables readers to
understand the critical trends driving the growth of this market.
• Key Takeaways & Strategic Recommendations: Featuring major opportunities
and crucial factors for prepaid cards highlighted across the landscape; making for
important reading for key stakeholders, including card issuers, card networks and
any other corporate institutions or financial institutions.
• Juniper Research Competitor Leaderboard: Key player capability and capacity
assessment for 21 prepaid cards providers; positioning them as either established
leaders, leading challengers, or disruptors and challengers. Our Competitor
Leaderboard scores these companies on their size of operations in the space, their
extent and breadth of market partnerships, the sophistication of their platforms
and Juniper Research’s view on each company’s innovation and future business
prospects. The company profiles include:
o American Express
o Discover
o Green Dot Corporation
o Mastercard
o Recharge
o Visa
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• Benchmark Industry Forecasts: 5-year forecasts for the prepaid cards market,
including the number of prepaid card users, the number of cards in issue (physical
and digital), transactional volume and value (including a split for digital cards) and
the total revenue from prepaid cards for providers. This data is also split by our 8
key regions and 60 countries.
What’s in this Research?
1. Market Trends & Opportunities: Detailed analysis and strategic
recommendations for card vendors for capitalising on potential opportunities
and key trends in market.
2. Strategic Analysis: Examines the future outlook for likely key uses, and provides
comprehensive analysis of key trends and market disruptions driving growth in
the market. The report also provides an assessment of 21 major players within
the prepaid cards market and their positioning in our Competitor Leaderboard.
3. Interactive Forecast Excel: Highly granular dataset comprising over 15,000
datapoints; allied to regional and sector analysis tools. Includes regional and
country-level analysis, together with 5-year forecasts for the prepaid cards
market, including the number of prepaid card users, the number of prepaid
cards in issue (physical and digital), prepaid cards transactional volume and
value (including a split for digital prepaid cards) and the total revenue from
prepaid cards for providers.
4. harvest Online Data Platform: Visualises all the data in easy to use and
exportable graphs, tables and charts, and features continuous data updates for
12 months.
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Publication Details

Publication Date: May 2023

Authors: Nick Maynard & Sean Yau

Contact: For more information contact info@juniperresearch.com

Juniper Research Ltd, 9 Cedarwood, Chineham Park, Basingstoke, Hampshire, RG24

8WD UK

Tel: UK: +44 (0)1256 830002/475656 USA: +1 408 716 5483 (International answering
service)

http://www.juniperresearch.com

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