Bank-issued gift cards and other prepaid products represent the next significant market opportunity for credit card schemes Visa, MasterCard and Amex, according to a recent report from TowerGroup. With payments on gift cards predicted to exceed USD 73 billion by 2007, the card issuers are plugging their own products and in fact TowerGroup expects bank-issued gift cards to eventually overtake retailers’ gift cards in terms of sales volume. Amex plans to offer its cards in grocery and drug stores and in shopping malls within six months, while Visa and MasterCard are also offering their cards over multiple channels.
Retailers’ gift cards will take a growing slice of the overall gift card pie in the next few years, TowerGroup notes, despite their role as a loyalty product and a channel for pre-selling merchandise. Bank-issued gift cards are conversely financial instruments with associated protections such as chargeback rights, dispute management and zero liability if a card is lost or stolen, and will achieve a greater percentage growth in the next five years. Going forward, TowerGroup envisions that bank-issued gift cards will evolve into reloadable, co-branded products with loyalty features similar to those offered by credit or debit cards.
Mercator Advisory Group similarly predicts segment-specific prepaid solutions enabling financial institutions to capitalize on new market opportunities, to grow at the expense of general-purpose prepaid solutions. Gift cards represent the largest ‘closed’ solution sector, at USD 40 billion, Mercator notes, and the typical ‘closed’ model benefits merchants, but not consumers, who have a preference for ‘open’ solutions. In such cases, gift card providers using POS activation (POSA) systems can distribute their cards to selected retailers for sale, while emphasizing the low inventory costs and opportunity for revenues.
(ePaynews.com)