News & Resources

Payment company boost profits by investing in prepaid products

Aug 01, 2013 Sean Albert

The use of prepaid products such as ACH cards has been increasing in the United States in the last few years. Many consumers are turning to the alternative financial solutions as they recognize them as viable alternatives to traditional banking and credit accounts that many underbanked individuals are unable to partake in.

The growth of the sector has been rapid and is benefiting many enterprises that are starting to invest in prepaid services.

According to the Associated Press, Total System Services has improved its financial outlook for the coming year, due to its acquisition of a prepaid service earlier this year. The source reported that the company purchased NetSpend for $1.4 billion in January which gave it access to nearly 68 million consumers who are largely underbanked, ideal candidates for prepaid products that NetSpend offered.

Earlier this year, Total System Services indicated that it would see yearly revenue would be between $1.96 billion and $2 billion. However, in the wake of the NetSpend buyout, the company now estimates that it will bring in between $2.14 billion and $2.18 billion in 2013.

Also, the company is predicting earnings of $1.69 and $1.72 per share, an increase from the $1.43 to $1.45 mark previously estimated, the AP noted.

Market expansion


Data from CardHub.com showed that the price of prepaid products is becoming more affordable. In its Prepaid Cards Report - 2013, the source found that the cost of cards used as alternatives to checking accounts declined by 46 percent from 2012 to 2013.

The source also cited data from the Mercator Advisory Group that showed just how much the market for alternative financial tools is expanding. From 2008 to 2012, prepaid card use nearly tripled, totaling $76.7 billion. By 2015, $168.4 billion in prepaid transactions are expected to be made.

According to Novum Bank, many businesses are starting to realize that by accepting prepaid card transactions, they can open their doors to more customers. Retailers in particular are likely to benefit from investing in prepaid services that allow for innovative electronic payments.

One of the benefits of prepaid products is that they can be customized for various businesses. Gift cards or company-specific products can be created with a corporate logo or branding included on them, which can boost brand recognition, the source indicated.

With the prepaid market growing, enterprise leaders should seriously consider taking advantage of the opportunities that the expanding sector offers.