Demand for prepaid cards increases
July 05, 2013

Accepting multiple forms of payment at the point of sale offers small businesses the opportunity to increase sales and customer satisfaction. Debit and credit cards have been popular among consumers for years, and another type of plastic, the prepaid card, is starting to gain a following. Prepaid cards provide many of the benefits of debit and credit cards, such as increased financial security, and are similar to gift cards in many ways. However, prepaid cards can be used at many types of retailers, which allows additional payment flexibility for consumers. In fact, ATMs may soon be dispensing prepaid cards. Companies that already accept debit card payments through integrated payment systems may begin to see customers who used to reach for cash instead pull out a prepaid card.

Consumers switch from cash to plastic
According to The City Wire, a business news site, prepaid cards are quickly becoming a viable currency option for many customers who want the security of plastic without investing in a credit card. Cards that can be reloaded allow the user to remain anonymous at the point of purchase. Customers can decide exactly how much is on the card, offering them greater control over their finances while still allowing consumers to reduce their use of cash. Many also like that the card is disposable, which gives them the ability to easily switch issuers.

Ben Jackson, senior analyst for Mercator Advisory Group, told The City Wire the growth in prepaid card use can be attributed to increased privacy needs and consumer value placed on the security of plastic payments.

"There are plenty of legitimate reasons that someone might want to make an anonymous payment," Jackson said. "There are three broad reasons why someone might want to avoid a traceable payment: marketing, safety and gifting."

As prepaid cards become more popular, Consumer Reports noted card-serving ATMs will be on the rise. While consumers may have to pay a fee to receive a card or use one, the news source reported many like reloadable plastic since ATMs often have a fee to dispense cash as well. Consumer Reports suggested consumers in the U.S. may begin to see card-serving ATMs in the next year or so, with wide-spread adoption by 2015. Prepaid cards work just as debit or credit cards, and companies that have invested in payment processing already have the tools to accept the purchasing method.

Nexus: G-WEBCD2