Prepaid travel cards surge in popularity
Prepaid travel cards are making an impact on the Australian financial services market, widening into mainstream usage with a rapidly growing acceptance. According to the Research and Markets Prepaid Cards Global Strategic business report. The Asia pacific represents the fastest growing regional market for prepaid travel cards, with a projected Compound Annual Growth Rate (CAGR) of 19% over the analysis period.
Prepaid cards, which allow travelers to carry foreign currencies in convenient debit card format, represent an attractive proposition in the payment industry owing to their inherent flexibility, security and convenience. Light years ahead of traditional travelers cheques, they are part of a natural response to the proliferation of online banking and e-commerce.
The market has registered strong growth despite the challenging economic environment, driven by the increase in number of consumers without access to credit cards and bank accounts.
Prepaid cards act as portable checking accounts, but entail lesser risk when compared to loans and credit cards. The market is expected to witness continued growth supported by a host of factors such as rise in the number of consumers preferring payment cards over traditional banking the entry of new brands, and the pull back of free checking facility for low balance consumers by banks. Moreover, with credit card interest rates rising each year, consumers are shifting to alternate payment modes such as prepaid cards. Another growth driver is e-commerce as consumers use prepaid cards instead of credit or debit cards for making online purchases.
As the largest comparer of prepaid cards, Mozo.com.au has watched the prepaid phenomenon from the start. Prepaid cards aren't a new thing, they've been around for several years but it's only been in the last 12-18 months that we've seen a rapid widespread acceptance.
Forerunners were the Travelex cards and prepaid travel cards from the big four, but now the phenomenon is quite widespread more than ten available in the market and new contenders from the airlines shaping up to be highly competitive.
However, consumers should be wary of fine print when they come to choose a prepaid travel card. Reload fees and provider-controlled exchange rates can make all the difference to the value of the card so the prepaid service is far from "free." In many cases the prepaid cards prove a less attractive option than using your own debit card to pay for purchases overseas. A good starting point to work out the best option for you is the Mozo travel card comparison tables where you can compare exchange rates and fees on a number of cards by destination and currency.
For the moment, closed loop prepaid cards represents the largest market segment in terms of card load. However, open loop prepaid cards are expected to grow at a faster rate through 2018. Network-branded open loop prepaid cards are gaining wider acceptance among global investors, with growth largely fueled by the popularity of general purpose re-loadable cards, government disbursement cards and payroll cards.
With credit card interest rates rising each year, consumers are looking for alternatives like prepaid and debit cards. Security is also a growing concern with prepaid cards providing an extra level of protection for e-commerce purchases. New entrants to the market are a good thing for consumers as challengers will bring competition and drive transparency of this new and exciting growth-area of banking.