As consumers' finances deteriorated during the recession, many turned to prepaid cards
Los Angeles, CA (PRWEB) July 03, 2012
The Prepaid Credit and Debit Card Providers industry has experienced explosive growth during the five years to 2012. “While other industries have been crippled by the recession, the weak economy played to the industry's strength,” says IBISWorld industry analyst Nima Samadi. “Fewer consumers had access to credit and bank accounts and instead opted for prepaid cards.” The industry also benefited from the rising need for electronic payment forms and favorable demographic shifts. As a result, revenue is expected to grow at an average annual rate of 43.8% to $3.1 billion in the five years to 2012, with revenue forecast to grow 33.3% in 2012 alone.
The economy is a major driver of demand for prepaid debit cards. An increase in the national poverty rate increases demand for this industry because lower-income consumers tend to have limited access to banking and credit lines. According to Samadi, “As the number of individuals with poor or limited credit and those who do not qualify for normal checking or savings accounts grew, so did demand for prepaid cards.” The number of e-commerce sales is a significant driver of Prepaid Credit and Debit Card Providers industry demand. Consumers who do not have conventional credit or debit cards purchase prepaid cards in order to complete online transactions. Young consumers are also a key demographic for prepaid cards. Young adults who do not qualify for a bank account but want the conveniences of a debit card are increasingly relying on prepaid cards. As the size of the population aged 18 and younger increases, so does demand for prepaid cards.
The industry's continued aggressive growth will be supported by a number of factors in the next five years, including an improving economy and disposable income growth. Consumers will also continue to flock to prepaid credit cards due to the ongoing risk of credit card fraud and identity theft. Industry growth will be slightly slower than in the past five years, however, limited by increases in revolving credit from traditional credit card issuers, which will siphon away some of the industry's business. In addition, in May 2012, the Consumer Financial Protection Bureau (CFPB) announced that it will examine prepaid debit cards to consider new regulations to protect consumers. By restricting the assessment of fees (or forcing their upfront disclosure), these regulations could hamper an important stream of revenue for prepaid card providers. The Prepaid Credit and Debit Card Providers industry exhibits a low degree of market share concentration due in part to the many smaller players that are entering the rapidly growing industry. Also diluting market share concentration is the increasing number of financial institutions and banks that also offer prepaid credit and debit card products. Current major companies include Green Dot Corporation and NetSpend Corporation. For more information, visit IBISWorld’s Prepaid Credit and Debit Card Providers in the US industry report page.
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IBISWorld industry Report Key Topics
This industry includes companies that issue pre-loaded open-loop credit and debit cards to consumers for making purchases. This industry does not include EBT cards and closed-loop store-branded gift cards.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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