The prepaid industry has evolved dramatically, especially in recent years. The Straight & Arrow tapped industry veteran Loraine DeBonis, editor-in-chief of payments news leader Paybefore, for her perspective and insight into the evolution of prepaid and what we have to look forward to in its future.
S&A: In the course of your career with Paybefore, how has prepaid transformed?
LD: I’ve been covering prepaid for about five years now, and one thing that hasn’t changed is the excitement around the industry. Prepaid is still hot. And, it’s easy to see why—it makes payments accessible to everyone, which has huge implications, not just in the U.S., but particularly in emerging markets. The biggest change—if we avoid the regulation conversation—has to be the entrance of mobile players into the market. While, we haven’t really seen that happen in a big way in the U.S. yet, I think that’s one area where we’ll follow Europe’s lead. Mobile operators have great reach and the potential to get prepaid cards (physical or virtual) into millions and millions of hands. I think mobile operators and probably the Social Security program will do the most to raise prepaid’s profile among consumers in the next few years.
S&A There’s been a lot of shift in the payments industry from a regulatory standpoint. What segment is going to benefit? What’s the biggest change?
LD: CARD Act made some big changes, but the biggest impact has to be Durbin. There’s a lot of talk about how banks are going to flock to prepaid since there is a carve-out for GPR, but the Fed put a lot of barriers up to that when it issued its final rule in July. Regulating interchange, whether you’re talking about a traditional debit card or a prepaid card, is going to require some rethinking of the business model. I’m afraid the biggest loser is going to be open loop gift, which doesn’t have a lot of options for increasing revenue.
S&A: At the end of the day, we’re all customers too. From a consumer standpoint, what are you excited about? What new trends are you following?
LD: I live in a rural area and shop online a lot, so I’m excited about virtual/mobile gift card applications. I’m not much of an app user, but the PayPal “bump” app, which lets you send money to a friend by tapping phones sounds pretty amazing and is getting quite a bit of use from their customers.
S&A: Talk of the mobile wallet is everywhere. From your perspective, where does it stand? How far off from widespread adoption are we?
LD: That’s the million-dollar question. Despite all of the media frenzy—there’s another announcement, partnership or pilot announced just about every day—it’s going to take time. Everybody seems to be banking on NFC, but we have a ways to go before there’s truly enough merchant acceptance as well as NFC-equipped handsets. I’m interested to see where folks who aren’t relying on NFC can go and how fast.
S&A: What’s going to dominate Paybefore headlines the rest of the year?
LD: In the U.S., we’re not done with Durbin yet. We’ll be watching the small-issuer exemption closely because I think there’s still some concern about how that works in the market. Even if small issuers don’t lose interchange revenues to the extent that big issuers do, there’s a chance that interchange could go down. I’m looking for companies to rethink the business model and look for new revenue streams whether that’s through valued-added services that consumers are willing to pay for or loyalty and rewards programs that pay for themselves by increasing stickiness. We expect to continue seeing innovative product launches and intriguing partnerships or JVs that shake up the market. On the European front, we’ll be watching regulation but also the entrance of new players as e-money issuers. We’re excited to see the kinds of products they bring to market and the effect they can have on consumer awareness. Latin America and Asia-Pacific, particularly India and China, are markets to watch. And of course, we’ll be covering mobile!
*Have any questions for Loraine? Contact her at ldebonis@paybefore.com.
