Prepaid Instruments : Catalyst to Cashless Journey

Recently published World Payments Report 2015 talked about the contribution of prepaid cards/wallets in Singapore’s journey towards Cashless economy. Over the period of time prepaid instruments have become a force to recon weather its in m-pesa in Kenya or in Singapore or Sweden or US wherein 23 million adults use them regularly. Author believes prepaid instrument’s coupled with

• Instant payment infrastructure : Wow factor
• Mobile : The most ubiquitous form factor
• Unified Interoperable network : Anytime , Anywhere access
• Distribution : Ease of loading money
• E-Commerce : Usage driver

will be the key catalyst in any economy’s journey towards cashless.

The achievement of above will require strong collaboration between

• Mobile Network Operators
• Regulators (In most countries banking and telecom operators are separate)
• Banks and other Financial Institutions (Insurance/MF/Pension)
• Payment Infrastructure Providers (Like in India- National Payments Corporation of India)
• Global Giants like Visa , Master, Amex.
• POS infrastructure providers like FDC, ATOS, Ezetap, mswipe.

allowing innovation in critical retail consumer spending space like

• Travel (Train, Bus, Cab , Auto)
• E-commerce
• Utility
• Mom-n-Pop Stores.

It is these kind of collaboration that have led

• Singapore: wherein 80 % of 3.8 billion non cash payment’s happen via prepaid instruments.
• M-pesa : 3.4 billion transaction’s via prepaid mobile wallet.

The key difference between above 2 is while in Singapore it is multiple cards utilised for varied services in Kenya it is one instrument good for everything.

In future (5-7 years from now) though author believes everything will converge in a smart phone and it will have

1. Digital Versions of prepaid, debit and credit cards.
2. Loyalty cards.
3. Personal loan accounts (Parameterised Product’s allowing instant disbursals)
4. Savings and Current Account.

24X7X365 Access to fund movement between these via Immediate and Unified Payments Solutions will make the transition smoother and seamless.

So in future (and in Kenya via Lipan a m-pesa , kenyan’s are already living it) the retail merchant payments can move from all other acceptance medium (including NFC) to mobile to mobile payments.

So why Prepaid Instruments are great starting (and off course one can continue with them as long as you want) point ?

1. Limit Expenses: You can only spend as much as you have in wallet and therefore it can act as a check against overspending habits.
2. Security: While they are as safe as anyother financial instrument however your threat of loss due to any kind of compromise (personal or data theft) is limited to amount in the instrument. In nut shell when you use your savings account you expose your entire savings to potential threat while it is limited in a prepaid instrument.
3. Travel and Pocket Money : For travel to school /college via metro, payment of food at school canteen, various overheads in school.
4. Gift of Choice: To your friend/office colleague allowing them to use it the way they want. Giving an open loop universally accepted Visa enabled Gift card is a much smarter choice then offering a retail chains closed loop card.
5. Line of sight of petty expenses: Many organisations still offer cash payments to employees against travel or manage expenses in hub location. A reloadable open loop prepaid card is a great way to keep auditable track and bring transparency to such expenses.
6. Blue Collar Payroll : You are a start-up and experience high churn on blue collar worker , prepaid payroll cards/wallets allowing anytime, anywhere access to funds are great tool to manage them.

Catalyst to Prepaid acceptance  

Credit History Creation: A prepaid instruments currently don’t support in creating credit history for self, except Kenya wherein same has already started in form of m-shwari .

Minimum Documentation: In such environments wherein the final beneficiary is KYC issuance without documentation. Same is already in place in India wherein you can open a semi-closed digital wallet with basic information.

This can go a long way in further establishing the utility of prepaid cards.So go ahead use one to experience the convenience first hand. Some other day author will come back and discuss in detail prepaid cards as a cash management tool.

Disclaimer : The image is used for representational purpose only and the article is a outcome author's understanding of the subject and by no means endorsed via Visa or author's current organisation.