The pandemic changed the world as we know it and accelerated the use of digital payments across the board. Here’s how the pandemic fueled the growth of prepaid cards.
The global pandemic that kicked off in 2020 seems to have accelerated the growth of prepaid cards, due in part to their flexibility and the range of benefits they offer. They have been tapped for everything from COVID-19 stimulus payments to the distribution of other digital funds and disbursements. Mercator Advisory’s 2021 Outlook report highlights the growth of prepaid cards, noting that the amount loaded onto prepaid cards in the US rose sharply from 2019 to 2020, increasing from $374 billion to $397 billion, respectively. That number is projected to hit $462 billion by 2024.
Prepaid cards or gift cards have long been viewed as popular vehicles for sending money to friends and family, but the pandemic highlighted some of their more hidden and versatile benefits. This new perspective positioned prepaid cards as tools of commerce that could eclipse cash use cases.
Prepaid and Payroll Cards Dominate
Prepaid and payroll cards saw a sharp uptick in demand globally, as cards gained momentum over cash during the pandemic. In addition to their appeal as a non-cash alternative, prepaid cards are also favored among the un- and underbanked. Employees are able to access paychecks without setting up a bank account via payroll cards. Considering that roughly a quarter of U.S. households fall into the unbanked or underbanked categories – payroll cards can be a positive option for many Americans.
Payroll cards operate similarly to debit cards and can be loaded every pay period with the recipient’s paycheck. Just like debit cards, payroll cards can be used to make purchases or to withdraw cash. Not only do employees benefit, but small businesses can take advantage of this tool for staff who may not have access to many banking options.
Employees also enjoy the convenience of getting paid quickly, without any hassles. Efficiency and security make payroll cards ideal for employees who can also check account balances online, sign up for email and SMS alerts about deposits, and protect their funds. Missing prepaid cards can be reported missing, preventing employees from losing their balance.
Some employers have even started using prepaid cards as a rewards mechanism for employees who go above and beyond. Using prepaid cards to recognize hard-working employees can incentivize workers and boost morale.
A Flexible Digital Payments Option With Multiple Use Cases
In addition to payroll, prepaid cards can be used across a myriad of use cases. As a digital form of payments, prepaid cards are ideal to help businesses, government agencies, and even healthcare companies allocate dollars for pre-approved spending. Government agencies can use prepaid cards to support food stamps and other assistance programs which ensures that they are used to purchase allowed items only.
Even charities are leveraging prepaid cards known as Filtered Spend cards, which leverage an Approved Product List (APL). APLs designate which products are eligible for a particular program and can also provide businesses and nonprofits with granular reporting around purchases to ensure that programs are being successfully implemented.
The flexibility and convenience of prepaid cards make them optimal options for a wide range of activities and transactions, pandemic or no pandemic. The bottom line is that they provide people with access to funds as well as a way to manage those funds safely and conveniently.
Some companies are also expanding the benefits of prepaid beyond simply a physical card that can be used to access funds or transact in a contactless way. Some prepaid card companies are now offering features like electronic reporting, flexible enrollment, and online portals for employees using payroll cards.
Prepaid cards can also be used to incentivize customers to make purchases. Whether through rebate programs or loyalty rewards, prepaid cards can be one way to issue credits to customers. Since cards can be customized, brands can bolster brand value while enhancing communication with their customers. An added benefit is the ability to sync with mobile wallets and other digital payment platforms, enabling customers to use prepaid cards for contactless payments.
As prepaid cards continue to evolve and offer more intelligent features, they will further build use cases across a wide range of industries and segments. They are and will continue to be a strong way for businesses to direct spend, reinforce the brand, and add value.