Mercator Advisory Group’s Prepaid Market Forecast 2011-2014 expects prepaid market growth to slow over the next four years as regulatory and economic issues, as well as saturation in segments including unemployment, impact the market. Open-loop loads are expected to total $281.7 billion in 2013, down $139.4 billion from last year’s forecast of $421.1 billion.
“I expect there is going to be more interest by open loop program managers to sell their cards in convenience stores,” said Ben Jackson, senior analyst at Mercator Advisory Group. “They want that exposure and that distribution. Where the open loop card gets interesting is, depending on the type of card, it may be a card customers can use to replace things like money orders, so as a c-store operator thinks about they want to offer, they might think, ‘Is this an open loop card that can be sold to offer financial services?’”
Reloadable cards are a major opportunity for convenience stores. If a c-store can encourage customers to reload the card at one of their stores, these customers are more likely to purchase other products while in the store. “It’s a question of what sort of services will the convenience store operator want to have in their store and how much investment they are willing to make over time,” Jackson said.
Lock and Reload
TravelCenters of America (TA), a travel center business in 41 states and Canada operating under the TA and Petro Stopping Centers brands, does a strong prepaid business with a variety of long distance calling cards, prepaid wireless cards and gaming products, as well as a variety of open loop, closed loop and general purpose reloadable (GPR) prepaid cards.
Kathleen Stobierski, contracts and lease manager, who oversees the prepaid category for TA said prepaid wireless has taken a hit recently due to government funded programs such as Assurance Wireless and Safelink. “Assurance Wireless with Virgin Mobil provides low income families with 250 minutes of free service each month, and after they’ve used their free minutes they can go online and use a credit card or Paypal account to buy more minutes,” she said.
What’s more, prepaid wireless customers are moving away from adding minutes with a PIN printed on an in-store receipt. “The new trend is to reload online or using real time replenishment (RTR) where minutes are instantly added to a customer prepaid phone plan upon an in-store purchase. TA currently offers RTR for Boost Mobile customers. We are looking to expand the RTR option for other carriers,” Stobierski said.
TA sees customers gravitating more towards open loop cards. The chain currently offers NetSpend, nFinanSe and Green Dot, and is looking at adding Vanilla Visa Gift Cards and PayPal Prepaid MasterCards to its product mix. Customers can also reload their NetSpend, nFinanSe and Green Dot cards at all of TA locations.
“GPR cards are a huge part of our business,” Stobierski said. “The growth projections across all demographics for 2012 are strong.”
A Closer Look at the Prepaid Market
• The open-loop market is expected to see loads totaling $281.7 billion in 2013, down $139.4 billion from last year’s forecast of $421.1 billion.
• Open-loop sales are expected to exceed closed-loop load in 2014, a date that has been pushed off due to the discovery of a greater amount of dollar volume loaded onto closed-loop cards. The compound annual growth rates (CAGR) computed from 2006 to 2014 indicates that the growth for the open-loop market has decreased slightly to 34.5%. Over the same time frame, the CAGR calculation for the closed-loop market saw a modest increase to 8% due to the additional reporting of closed-loop gift cards.
• For closed loop in-store gift cards Mercator predicts a 5% annual growth rate in 2012, 2013 and 2014 respectively.
• The transition to digital for both music and movies is now happening at breakneck speed. Mercator Advisory Group projects a CAGR of 17% from 2010 to 2014.
• Mercator Advisory Group projects a CAGR of 20% from 2010 to 2014 for closed loop games and ring tones cards.
Source: Mercator Advisory Group’s Prepaid Market Forecast 2011 to 2014