Prepaid Cards Find Wide Appeal

prepaid 2Open loop, petroleum and in-store gift card sales were at $115 billion in 2012, according to Mercator Advisory Group, an independent organization that provides research and advisory services to the global payments and banking industries. This year, the category is expected to increase to $120 billion, then to $124 billion in 2014. And the growth is expected to continue to $128 billion in 2015 and to $132 billion in 2016.

At Torrance, Calif.-based Famima convenience stores, total prepaid card sales rose 5% last year over 2012, said Eddie Oh, buyer for the nine-store chain. The category was led by financial cards, such as Visa gift cards, which contributed 56% to the category, an 11% rise over 2012.

“People don’t want to give cash anymore for gifts to family or friends or to employees, and our customers are choosing the financial gift cards over third-party gift cards more and more,” Oh said. “I think the financial card market will grow even bigger over the next 12-24 months. It will be huge.”

Right now Famima just offers Visa, but the company is looking at adding more prepaid financial cards to the mix. Another big seller is iTunes cards, which account for 10% of the prepaid card category at Famima. On the other hand, wireless phone card sales decreased from 33% to 21% last year. Long distance cards dropped 10%.“But we have made up for those losses and then some with the sales of financial cards,” Oh said.

Debit cards also sell well at Famima. The company is planning on adding a larger selection of debit cards to meet the demand.

Emphasis On Promotions
To maximize prepaid card sales and make the selection and purchasing processes go more quickly and smoothly, employees must be trained on what each one is so they can relay that information to consumers.

“There are many different types of cards out there now and it can be confusing for customers,” Oh explained. “We make sure that our employees know what each card is and how it works.”

During December, Famima heavily promotes its prepaid card selection. Employees are trained in suggestive selling and are encouraged to create eye-catching displays with the cards. With the support of its prepaid cards vendor, Famima awards cash prizes to the stores that bring in the most revenue from the cards.

“Even though they are a very low margin item, it takes very little labor and little space for the spinner rack to carry prepaid cards,” Oh said. “So you have nothing to lose by carrying them in the stores and sales can be very high if you offer the right mix of cards.”

Oh also views the cards as a means to increasing incremental sales.“Very few people come and purchase a prepaid card and nothing else,” he said. ◆

Prepaid Sales Growing
Mercator Advisory Group finds prepaid cards are on the rise. Open loop gift cards saw $11.7 billion in sales, while payroll cards accounted for $20.7 billion.

33 Types of Prepaid
■ Open Loop Travel: $690.1 Mil
■ Open Money & Financial Services: $18.3 Bil
■ Open Gift: $11.7 Bil
■ Remittance: $1.2 Bil
■ Business Travel: $540.1 Mil
■ Open Loop Events & Meeting: $307.5 Mil
■ Open Loop Employee & Partner Income: $4.1 Bil
■ Consumer Incentive: $6.3 Bil
■ Relocation: $162.1 Mil
■ Campus: $1.21 Bil
■ Closed Loop In-Store Gift: $99.4 Mil
■ Distributed In-Store Gift: $8.9 Mil
■ Social Security: $7.9 Bil
■ TANF Cards: $16.1 Mil
■ Court-Ordered Payment: $5.2 Bil
■ State Unemployment: $11.2 Bil
■ Insurance: $619.4 Mil
■ Payroll: $20.7 Bil
■ Benefits Cards: $343.6 Mil
■ FSA/HSA Cards: $3.3 Bil
■ Purchasing Cards: $ 37.1 Mil
Source: Mercator Advisory Group, December, 2013

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