2.3 Billion Prepaid Card Transactions In Europe By 2010

The European prepaid card market is set to explode in the next five years:

• A total of 2.3 billion prepaid card transactions per annum anticipated by 2010, representing 5% of total card transaction volumes and 3% of total card spending.
• €75 billion spend expected across 360 million prepaid cards. This represents substantial growth on the 40 million cards and 150 million prepaid transactions anticipated in 2006.
• Forecasts are that annual growth rates of the prepaid card market will exceed 110% for the next five years, and prepaid gifting products (card replacement for gift vouchers) will fuel a significant proportion (almost 30%) of total spend. Other segments that will drive growth include:
• Travel products (designed to offer an alternative to travellers cheques and foreign cash) which will account for 15% of spending.
• Internet payment cards (which provide a secure alternative to credit cards) are expected to generate 13% of spending.
• Company rewards and incentives programmes are set to account for 12% of spending.

Despite the anticipated rate of growth, Peter Jones, Managing Director of PSE, commented that “banks must act quickly if they are to secure their share of the prepaid opportunity and compete with non-banks. We have forecast that 58% of spend will occur on Visa or MasterCard branded cards but, to date, banks and financial institutions have been adopting a ‘wait and see’ strategy. The 1.9 million prepaid cards issued by Poste Italiane in Italy illustrates how non-banks are already exploiting this opportunity”.

One product does not fit all – forecast of uneven uptake of prepaid products across Europe Significant differences are expected between European national markets as the prepaid opportunity expands. Although some 20% of the total annual European spend on prepaid cards will be generated in Germany, Austria & Switzerland, spend per prepaid card in this region is forecast at €240, compared to €340 in the UK, €398 in France and €410 in Scandinavia. Similarly the take-up of cards varies – from 655 cards per 1000 people in Germany, Austria & Switzerland, to 691 in the UK, 693 in France, and 650 in Scandinavia. These differences reflect the wide range of cheque and card usage that characterises European payments in general – the Danish for example use their cards 12 times a month, compared to Germans who use theirs 1.5 times.

Those prepaid experts interviewed by PSE for this report agreed that European products will differ from those which are successful in the US, particularly those targeted at consumers under-served by banks. US prepaid products rely on displacing cheque wage payments, and often the less well off are obliged to spend c.$50 - $60 per month on ‘check cashing’, paying their utility bills or sending money home to their families. In Europe the greater prevalence of electronic salary payments and government benefits plus free ‘basic banking’ products means the unbanked population is significantly smaller than the US and consumers are unused to paying such high charges.

The PSE Prepaid report has been sponsored by MasterCard Worldwide, LINK Interchange Network Limited (UK) and First Data International, and is believed to be the first of its kind to define, from both a qualitative and quantitative perspective, the European prepaid market by country and product type.