Demand for prepaid cards grew as banking fees rose and legislation increased.
New York, NY (PRWEB) August 08, 2014
The Prepaid Credit and Debit Card Providers industry has experienced strong growth during the five years to 2014. While the slow recovery following the recession hampered many other industries, the weak economy played to this industry's strength: Fewer consumers qualified for credit and bank accounts and instead opted for prepaid cards. “A growing need for electronic payment forms and rising fees in traditional banking institutions made prepaid cards attractive,” according to IBISWorld Industry Analyst Daniel Carusotto. As a result, revenue is expected to grow astronomically, at an average annual rate of 28.6% to $4.8 billion in the five years to 2014, with revenue forecast to grow 20.6% in 2014 alone.
The economy is a major driver of demand for prepaid debit cards. Growth in the national poverty rate increases demand for this industry because lower-income consumers tend to have limited access to banking and credit lines. 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. Further leading to higher demand for prepaid cards was the Durbin Amendment, which capped interchange fees banks could charge on credit cards. “In response to this legislation, banks increased banking fees and bolstered minimum account balances, effectively lifting the number of underbanked consumers,” says Carusotto. Adding further to industry demand, the number of e-commerce sales has grown strongly over the five years to 2014. Consumers who do not have conventional credit or debit cards purchase prepaid cards to complete online transactions.
In the five years to 2019, industry revenue is expected to continue its strong performance. A number of factors will support strong industry growth, including an improving economy and higher disposable income levels, which will lead to increased transaction volumes, effectively raising interchange revenue. Middle-to-upper-income consumers will flock to prepaid credit cards due to the ongoing risk of credit card fraud and identity theft. However, the potential for increased regulation from the Consumer Financial Protection Bureau and other legislators, regarding fee structure and disclosure, may lead to higher compliance costs. This will cause industry profit margins to stagnate despite increased demand.
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 preloaded, open-loop credit and debit cards to consumers for making purchases. This industry does not include electronic benefits transfer (EBT) cards or 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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