Jun 10, 2013 Sean Albert
One big questions that many of today's merchants need to answer is how to accommodate their customers' changing payment preferences. While retailers have been making adjustments for years as new transaction methods cropped up, doing so can still be unnerving and result in major changes made to their business practices. As consumers become more enthusiastic about emerging technologies such as mobile payments and adopt prepaid options, such as ACH cards, with increasing frequency, business leaders must keep up in order to maintain a competitive edge.
Market growth on the horizon
According to a recent report from Javelin Strategy & Research, both mobile and prepaid technologies are set to experience significant growth over the next several years. In terms of mobile transaction solutions, the market is expected to increase from the $398 million seen in 2012 to $5.4 billion by 2018. Javelin noted that this rapid change will largely be driven by the efforts of leading networks to raise awareness and adoption, as well as more financial institutions getting on board.
Due to the fact that some leading prepaid cards now offer features that make them suitable substitutes for a traditional checking account, more consumers are opting to use these payment cards over credit or debit payment technologies. In fact, the research organization pointed out that prepaid sales totaled $120 billion in 2012, and by 2018, this number is projected to rise to $158.5 billion.
Javelin also emphasized that as these options become more popular, people are eschewing cash. In fact, while 81 percent of consumers still use cash, this figure is down two percentage points from 2011.
Prepaid solutions maturing
PYMNTS.com recently noted that ABI Research also acknowledged that prepaid cards are increasingly becoming a top choice for people around the world. The research firm revealed that shipments for open and closed loop prepaid cards across government and enterprise sectors is likely to total 3.6 billion between 2013 and 2018. Around 53 percent of the 2018 shipments will be smart card enabled, ABI Research predicts, which is a significant increase - 24 percent - from 2013.
PYMNTS emphasized that the utility of prepaid options has increased over the years, which is making them a more viable option for consumers in many demographics. For instance, while some governments are now using these solutions for dispersing benefits, campus cards are also driving growth. Additionally, a wealth of organizations see these technologies as a way to reduce costs by saving time and money spent on providing employees with more traditional checks. Business leaders can even implement prepaid methods as a way to gain better control over expenses, rather than supplying authorized staff members with credit cards to make critical company purchases.
Overall, while prepaid options, including ACH cards, become a more popular solution to many modern challenges, it is clear that these solutions will need to continue to evolve if they are to continue gaining traction.
"Serving the prepaid market is not as easy as providing a simple reloadable card anymore," Phil Sealy, a research analyst at ABI said, according to PYMNTS. "The emergence of additional functionalities, including simple banking applications, such as online account applications, direct debit set-up and transfer capabilities have further driven up demand."
ABI Research also stressed that the merit of prepaid cards is likely to be judged by how well the services they offer stack up to traditional banking cards. While there are already many benefits to using prepaid transaction methods, it will be up to merchants and developers to continue implementing helpful features to make them more appealing to consumers who may be on the fence about whether to use an alternative banking method or stick to the mainstream.