Prepaid Incentive Card Space Evolves

After facing difficulties last year, the consumer prepaid card market is expected to recover and regain its momentum, according to new research data. San Francisco-based Javelin Strategy & Research’s “2010 Prepaid and Gift Card Market Report” said while less than 28 percent of the approximately 3,300 consumers surveyed used a prepaid card last year, prepaid card usage will more than double by 2014, according to its own research. A separate survey, carried out in April by Westbury, NY-based Auriemma Consulting Group’s Cardbeat service, noted that 42 percent of polled respondents said they received a network-branded prepaid card, compared to 26 percent five years ago.

“The success of prepaid cards in the general consumer market has enforced awareness in the incentive channel,” says Michael Chittaro, senior business leader at Visa (pictured). 

Some of the driving consumer forces cultivating this awareness are the growing adoption of general-purpose prepaid cards as replacements for cash and checks in payroll and travel functions (mentioned in both the Javelin and Auriemma reports), greater difficulty for consumers to access credit since the financial crisis, and the proliferation of debit cards as an everyday payment alternative to cash. As general familiarity with the cards grows, companies are more receptive of them as an employee incentive tool.

“Lower cost and providing more choices have always been pretty much the case for companies moving to prepaid card solutions,” says Chittaro. “And it hits across all segments of employees and types of programs. My goal is to enable education and awareness of prepaid cards in the employee engagement channel.”

As a sign that the open-loop incentive card market is evolving as much as it is making inroads, Chittaro says Visa’s incentive industry partners, which include incentive houses as well as gift card providers, are seeking technology solutions that enhance services and improve clients’ employee engagement. He cites one end-user, a watch company that wanted to engage its reps, using a proprietary Web platform that allowed those reps to track their progress in its incentive program and be constantly reinforced.

"Three years ago, it was all about putting the cards in the hands of employees. Now, incentive companies are offering unique Web interfaces for incentives," says Chittaro, as they seek better ways of providing clients with full-service or value-added solutions. “Clients are looking to them not only for low cost but also innovation.”

Since the big economic collapse, employers and marketers are either segmenting or drilling down their incentive audiences more, in efforts to better engage and motivate them under the distressed business climate. As a byproduct of these efforts, organizations have gotten much more sophisticated with prepaid cards, tailoring them to unique reward themes and merchant categories—and going beyond simply adding fancy card carriers and packaging. Chittaro attributes it to making rewards stand out more.

Traditionally, Chittaro says "employers never have really looked to steer redemption patterns. Companies are not concerned where the cards are spent." But what he dubs "selective networks," where the cards are limited to a specific group of merchants, is "an interesting promotional idea that companies are now taking advantage of. There's definitely an uptick in companies looking at ways to package Visa cards to unique themes."

Another prepaid card provider that is focusing on this so-called semi-open-loop prepaid card segment is InteliSpend Prepaid Solutions, which was formerly known as American Express Incentive Services. While InteliSpend is still offering traditional, fully open-loop AmEx prepaid incentive cards, it told Incentive back in May that it will have a “laser-like focus” on its DirectSpend product, which is seeing a growing market share. Some themes are dining, travel, electronics, and home improvement. 

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