31 December 2015
The world of prepaid cards will drive Italy towards the digital
In a short space of time, prepaid cards have changed payment habits and increased the associated services and methods of use for millions of users. In particular, the Prepaid Summit Europe 2015, held in Milan in early November, revealed that Italy is one of the countries with the highest rate of use of and reliance upon this type of payment instrument.
Currently in our country, the real competitor of prepaid services is cash, which still represents 70% of commercial transactions, but which is increasingly coming up against a number of other phenomena, such as e-commerce, mobile commerce and the spread of retail marketing services linked to “derivatives” of the prepaid, which are paving the way for the wider dissemination of digital services.
In the world of prepaid, two large market categories are said to be developing: the segment of young people and that of the “new resident” which, in some aspects, feed into the other major segment, that of unbanked people, made up of approximately 77 million people in Europe who, for various reasons, do not have or do not want to have a bank account and who are some of the most loyal users of the prepaid. But even the reference markets represent a major stimulus to the prepaid choice and, in this regard, alongside the sectors of airline travel and retail trade, the industries of online gaming and online betting are also growing – where consumers prefer to rely upon prepaid systems.
While it is relatively easy to win customers, it is much more difficult to follow their habits and to retain them along a route that eventually increases their involvement and level of use of new services. In this sense, an essential role is played by the retail world – the market that more than any other has been able to interpret the huge opportunities of the prepaid and to express this in forms of loyalty and reward instruments and new payment methods.
The turning point in the world of the prepaid is thus represented by the transition from a service intended to manage payment services in a “rechargeable” and controlled manner to a fully-fledged platform of services. The prepaid, in fact, has the best characteristics to lead a migration to the digital: low risk, great ease of use, total control by the user, flexibility and adaptability to new services.
In Italy alone, a market of 900 million prepaid gift cards is there for the taking, while only a slice of less than three million units has actually been touched. But this is only the first macroscopic figure regarding the potential aspects held by prepaid solutions in our country destined for transactions in the physical and online world.
Prepaid cards have, however, already charmed the world of retail banks, which see, in this instrument, the promise of expanding into new market niches. One of the leading Italian banks has launched a prepaid card aimed mainly at three types of target that have, until now, not been truly engaged by banks: hauliers, travel agencies and the public administration. This card is equipped with an IBAN code, it can be topped up for up to 60,000 Euros, its functions are customisable and above all it can be managed by remote banking. It is ideal for making payments without using credit lines, paying road tolls with automatic booths and above all controlling items of expenditure. The bank’s reports indicate that the card is used in Italy (54% of cases), as in Europe (43%), in face-to-face situations (55%) and for e-commerce transactions (35%).
The development of this market will therefore depend upon the capacity to provide to the customer an access gateway to prepaid services. The ambition must be to create a prepaid world in which the individual card does not win, but a new common and widespread method of making and receiving payments. Therefore, all types of stores, banks included, must be involved in order to entice the customer with a bouquet of services and benefits, and to offer to business operators equally innovative propositions – from relational marketing to the supply of coupons to the advanced functions of CRM.