Report Reviews Open Prepaid Market Performance

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This latest report reviews all 12 categories and 33 market segments and then benchmarks the spending, growth, opportunity and the number of cards issued in 2004 for all Open Prepaid Solutions.

Mercator Advisory Group has put out a new research report. This latest report, the first of three reports that will thoroughly benchmark everything prepaid, reviews all 12 categories and 33 market segments and then benchmarks the spending, growth, opportunity and the number of cards issued in 2004 for all Open Prepaid Solutions.

The report finds that the total spending across all 33 prepaid market segments, including all Open and Closed Solutions, grew by almost 21 percent from $110.7 billion in 2003 to $133.9 billion in 2004. Closed Solutions loaded $124.8 billion while Open Solutions loaded only $9.04 billion. While Open segments are much smaller in total dollars spent, the small size enabled impressive growth rates. The entire Open market grew by 91.6 percent while four of the six segments that grew by 100 percent or faster are all Open Solutions.

Tim Sloane, Director of the Debit Advisory Service for Mercator Advisory Group and the author of the report, indicates that these growth rates can be deceiving.

"For example, while the State Unemployment Segment grew at an impressive 350 percent, the fastest growth rate of any segment, the percentage was established with an increase in spending of only $14 million when the state of Utah moved to full deployment.,” he says. “While the Money & Open Gift Card Segment posted an impressive growth rate of 255 percent, moving from the $400 million in 2003 to $1.42 billion in 2004. This segment suffers instability derived from high risk associated with Federal and State legislation combined with low margins inherent to the product. The most stable and profitable Open segments are the Payroll, Benefits, Employee & Partner Incentives, and Consumer Incentive markets. Our research documents the powerful benefits that both the cardholder and the business derive. It is clear that businesses are ready to ramp up deployment in these areas."

The report is 35 pages and contains 24 exhibits.Report highlights include:

• The entire prepaid market, including Open and Closed solutions, has grown by almost 21 percent from $110.7 Billion in 2003 to 133.9 Billion in 2004.

• The total of all spending on Open Solutions was $9.04 Billion, an increase of close to 91.6 percent from the $4.7 Billion spent in 2003.

• The total of all spending on Closed Solutions was $124.88 Billion, an increase of close to almost 17.8 percent from the $106.2 Billion spent in 2003.

• Four of the six market segments that are growing faster than 100% are based on open solutions.

• At 350 percent the fastest growing market segment was Sate Unemployment, but this large percentage gain was established with an increased spend of only $14 million driven primarily by the state of Utah when it moved from a pilot to full deployment of its U.S.

Bank issued Card.

• The Money & Open Gift Card is the second fastest growing market at 255 percent but this growth rate belies the fragile nature of this segment. The fragility is created by the combination of uncertainty around regulatory challenges and thin margins for the issuers.

• Open Solutions providers should pay more attention to the benefits and market dynamics that make Prepaid Malls (Store Gift Cards – Distribution) so popular since this segment will increase the growth rate of the Closed Solution Market over the next several years.

Members of Mercator Advisory Group have access to this report as well as the upcoming research for the year ahead, presentations, analyst access and other membership benefits. Please visit us online at http://www.mercatoradvisorygroup.com

For more information call Mercator Advisory Group's main line: 781-419-1700.

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Linda Redden