The amount of money U.S. consumers are loading onto their open-loop prepaid cards continues to increase, and more consumers are buying open- and closed-loop gift cards for self-use, according to two separate studies by Mercator Advisory Group.
Nearly $300 billion is expected to be loaded onto open-loop prepaid cards in 2016, a 4.1 percent increase compared with $287.1 billion loaded last year. Funds loaded onto the cards are expected to consistently increase with a compound annual growth rate of 4 percent through 2019, when the total is projected to reach $341.3 billion, according to Mercator’s annual U.S. open-loop prepaid cards market forecast.
Growth has slowed from earlier forecasts because segments like GPR prepaid cards are starting to mature, among other factors, according to Ben Jackson, director of Mercator’s prepaid advisory service and author of the report. He also says the CFPB’s final rule on prepaid accounts, expected in October, might pose significant challenges for future growth, depending on how much the agency restricts prepaid card providers. “In addition, segments like state unemployment and TANF [Temporary Assistance for Needy Families] are expected to shrink, which slows the overall growth of the market,” Jackson tells Paybefore.
Another recent Mercator report indicates that more consumers are buying gift cards for themselves. Nine in 10 consumers reported purchasing open- or closed-loop gift cards in the previous 12 months, according to a 2016 survey. Of those consumers, two-thirds reported some of those gift cards were purchased for self-use, an increase from less than half who reported doing so in 2013.
“The growth has been driven, at least in part, by companies like Starbucks and Dunkin [Donuts] driving their customers to load cards into their mobile apps for day-to-day spending,” says Jackson. “Digital content like iTunes also have driven the growth in self-use. Finally, we think people are looking for discount cards through secondary sites, which may help drive up the self-use number.”
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