Visa and Mastercard have been long-standing pillars in the world of payments, providing credit and debit card services to consumers and businesses around the globe. In the United States more than three-quarter transactions are facilitated by Visa and Mastercard. In APAC around 65% of all card transactions are facilitated by Visa and Mastercard. Despite the fact that Visa and Mastercard have so much control over the financial markets, we are seeing businesses shift to a new type of payment structures that may disrupt the traditional methods. This shift is when companies launch their own prepaid cards for payment purposes.
Several global businesses have already created their own prepaid card programs, including Amazon, Walmart, Target and Starbucks. Amazon offers prepaid cards that can be used to make purchases on their website or at physical stores, while Walmart’s MoneyCard program allows customers to load funds onto a card for everyday use. Starbucks, meanwhile, offers a prepaid card that can be used to purchase coffee and other products at their locations. Finally Target launched its own Target RedCard. The RedCard is Target’s umbrella name for its branded card products, which offer users a 5% discount on all purchases at Target stores and on Target.com. The RedCard is such an important KPI for Target that they break it out in every single earnings summary.
The revenue generated by prepaid card programs can vary depending on the business and the program’s purpose. Amazon’s prepaid card program generated over $5 billion in revenue, while Walmart’s program generated over $1 billion. Starbucks’ prepaid card program is estimated to generate approximately $1.6 billion in revenue. Target did more than $100 billion in revenue in 2022, 20% of which happened on its own cards.
One of the primary reasons for businesses to make this shift is the reduced costs and increased profits. After a customer makes a purchase on from the card, the card service simply pulls money directly from the customers bank, acting like a router, this allows the business to avoid paying the swipe or interchange fees; which companies like Visa and Mastercard thrive on. By paying less fees businesses can increase their overall revenue. Moreover Prepaid cards allow businesses to set spending limits and control how funds are used, providing a level of flexibility that traditional credit and debit cards do not offer. Prepaid cards can be used for a variety of purposes, including employee incentives, marketing promotions, and gift cards which makes the entire framework more “sticky” and in turn creating more loyal customers.
Visa and Mastercard still dominate the payments landscape, but their prepaid card usage is declining. In 2022, Visa reported a 8% decline in prepaid card usage, while Mastercard reported a 11% decline. This decline is due in part to businesses creating their own prepaid card programs, which offer more control and flexibility than traditional credit and debit cards. Visa and Mastercard charge fees for their prepaid card services, including activation fees, transaction fees, and monthly fees. These fees can vary depending on the program and the provider, but they can add up quickly and be a burden for businesses.
Qglobe SDK includes a prepaid gift card system that allows businesses of all sizes to implement their own prepaid card program effortlessly. With Qglobe, businesses can create branded gift cards that can be redeemed at their locations or online. The system provides a range of features, including customer and employee incentives, marketing promotions, and analytics to track card usage and revenue.
In conclusion, businesses creating their own prepaid card programs will cause trouble for Visa and Mastercard. With the rise of technology and innovation, businesses are seeking more control over their finances and are finding that prepaid cards offer a level of flexibility that traditional credit and debit cards do not. By using prepaid cards, businesses can reduce fees, increase control over their finances, and promote their brand. Qglobe provides an effortless solution for businesses of all sizes to create their own prepaid card program and reap the benefits of this innovative payment method.