Brent Watters, director of marketing and prepaid advisory service [image-nocss] analyst for Mercator, told the room of prepaid-industry professionals and retailers that his company forecasts open-loop to surpass closed-loop sales by 2012. Closed loop should still see increases from $196.4 billion in 2009 to $233.8 billion over the next two years. Open loop, however, is predicted to increase from $94 billion to $292 billion.
Consumers thought twice before buying closed-loop cards recently, he said, due to concerns about companies going out of business. He added that open-loop players "get it" and are driving the market with innovations such as merchant-funded discounts.
And while 87% of consumers purchase prepaid cards as a gift, 16% use prepaid in one or more cash replacement applications: as a checking/debit replacement, as a way to buy online, or as a way to pay bills.
Watters said individuals from households with under $50,000 incomes are significantly more likely to use prepaid cards as a way to pay bills. That behavior could impact both types of cards.
"We're talking about the economy and the impact on the consumer, and what are customers doing and how are they budgeting," he said. "And they're actually buying closed-loop cards as if it's layaway. So they're picking up a $150 card at Best Buy, and they're saving it."
One opportunity he outlined for both open-loop and closed-loop cards was in reloadable cards. According to Mercator research, 62% of general-purpose reloads are estimated to originate from retail store locations. Private-label retail reloads also are far more likely to originate in store, with 65% of average estimated reloads occurring there.
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