Matthew Lanford looks at some recent research and
considers how the many opportunities for developing prepaid
products in Europe can be harnessed. Once consumers are convinced
of the prepaid benefits, survey findings show they become, not just
repeat users, but advocates of the product.
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The
opportunity for prepaid in Europe is phenomenal. A study undertaken
in 2010 by Boston Consulting Group (BCG) on behalf of MasterCard
puts the value of the European open loop prepaid market at $156bn
by 2017, a 26% year-on-year increase on the value of the market as
it stood in 2010.
This growth is not guaranteed. In
order to harness this opportunity each participant in the prepaid
industry will need to look closely at each individual market and
tailor its products to meet the differing needs of consumers
throughout Europe.
Recent research commissioned by
MasterCard Europe and undertaken by TNS among over 4,000 consumers
in the UK, France, Italy, Germany and Poland highlighted the growth
opportunities for prepaid across Europe.
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By GlobalDataCustomising prepaid to fit
the market
The penetration of prepaid across
much of Europe remains low, with just 4 out of 10 consumers holding
a prepaid card. This indicates many consumers are still unaware of
the benefits of prepaid and how it can meet their individual
needs.
Attitudes to card payment methods
vary enormously throughout Europe. While UK consumers have, for
example, been thought of traditionally as high credit card users,
the financial crisis hit the UK hard and has put pressure on
disposable incomes. These consumers are searching increasingly for
a control mechanism to manage their spending and repair their
personal balance sheets.
The BCG research reveals it is the
UK consumer’s open-minded approach to innovation and new
technology, combined with this need to budget more effectively,
that helps to explain why the UK is projected to remain Europe’s
largest prepaid market, worth an estimated $39bn by 2017.
In contrast, in Germany, where
financial management has always been high on the agenda and is
instilled at a very young age, history shows consumers can be slow
to adopt new payment methods despite having a well developed
electronic payment system.
With this in mind, emphasising the
budgeting aspect of prepaid to German consumers may have little
impact while the security that prepaid offers is likely to have far
greater resonance.
After prepaid gift cards, which are
owned by 29% of German consumers, prepaid internet cards are the
most popular form of prepaid card, held by 11% of consumers who
wish to shop online with the added peace of mind prepaid
offers.
The
research undertaken by TNS also suggests that prepaid should not be
seen as simply another means of payment or a replacement for other
payment methods, but a solution that can be adapted easily to
relate to consumers’ needs, for example, a modern public transport
pass, or a tool for budget management.
The significance of the nuances
between, and indeed within, European cultures should not be
overlooked.
For example, while cash remains
king for the older generation in Poland the younger generation is
enthusiastic about new payment methods and are adopting electronic
payments rapidly, creating a wealth of opportunities for prepaid.
In Poland two-thirds of consumers (67%) view prepaid as a modern
way to pay for goods and services.
In Italy, consumers have
traditionally been much slower to adopt new payment methods. Credit
cards are used reluctantly but the ability to manage their money
more closely and shop online has made prepaid an attractive payment
option and the research highlights that Italians are broadly
positive about all the benefits that prepaid offers.
According to the research, 56% of
Italians own a prepaid card, with 43% holding a multifunction card,
a significantly higher proportion than their continental neighbours
who are most likely to own a prepaid gift card.
The path to
growth
What is clear is that however the
market is being driven, prepaid is a solution which is answering
payment needs across the continent. As an industry we have to
recognise those trends and respond to them but we also need to
ensure we are taking what works in one market and using it to drive
growth in others. It is worth remembering that currently, just 4
out of 10 consumers hold a prepaid card. Moving that to just five
out of ten will add another 80m people to the European prepaid
community.
Our own research panels have shown
us that once you can convince consumers of the benefits of prepaid
cards they tend to become not just repeat users but also some of
the best advocates for our products. It is in all our interests to
make sure we are selling the benefits of prepaid in all
markets.
Matthew Lanford is head of
prepaid at MasterCard Europe
