Prepaid cards have emerged as a prevalent payment mode among consumers and for a growing number of small businesses. A prepaid card helps pay for goods and services and works similarly to a credit or debit card on a mobile payment platform. However, their prepaid nature makes them a more viable alternative for consumers who want to keep a tab on their expenses and are more frugal with their spending.
Moreover, they are more convenient than a credit or debit card as the person using it doesn’t provide their banking data. In addition, the card does not get linked to any credit or financial institution, meaning it keeps the consumers’ financial information safe from prying eyes. A prepaid card can be a branded card linked such as Mastercard and Visa, or store or app-specific exclusive to that entity.
What Are Some Different Kinds of Prepaid Cards?
Prepaid cards can be used in multiple contexts and settings. Let’s look at the types of prepaid cards that are available.
Open Loop Prepaid Cards: These prepaid cards are universal and can be used as credit and debit cards on a mobile payment platform anywhere such cards are accepted. Mostly these cards are issued by a business to their employees to provide meal benefits, bonuses, and other perks; however, consumers also buy these cards as gifts or for personal use when they want to shop online and offline without being store specific.
Closed Loop Prepaid Cards: These cards are exclusive to one store, business, or brand and cannot be used to purchase anything outside their ecosystem, like paying at your favorite bookstore or coffee shop. These cards can be topped up as and when required but don’t offer the flexibility of an open looped prepaid card.
What makes them so Popular?
Since a prepaid card offers almost the same useability as a credit or debit card without needing to link a bank account, they are considered a safe and popular option by consumers. These also include individuals who might not want to share their financial data every time they make a transaction. Even though credit and debit cards hold a much larger share in the mobile payment solution ecosystem, prepaid cards are quickly gaining steam worldwide.
Should You Allow Your Mobile Payment Platform to Accept Prepaid Cards?
Witnessing how popular they have become over the years, there’s no reason why your business’ mobile payment solution shouldn’t accept prepaid cards. There’s no need for additional hardware and software requirements as your existing mobile payment platform will work just as perfectly as it does with credit and debit cards. Since all the major brands issue prepaid cards, the process works similarly without a hitch.
How Consumers Benefit from Prepaid Cards
The benefits that prepaid cards offer consumers, the most prominent ones being a lesser risk of overspending, and they are a safer alternative to cash. But there’s more; let’s have a brief look.
- Less risk of overspending: Credits cards come with the inherent risk of overspending as they allow a consumer the option to buy now, pay later. However, consumers often end up overspending and find it challenging to repay, making prepaid cards a better alternative to being conscious of how much they are spending.
- Safer than cash: They are a more viable alternative to cash, as it can be riskier to carry. If you are travelling, a prepaid card can be a safer alternative as it can be reported and blocked, unlike cash.
- Easy to use and reload: The ease of loading a prepaid card as and when you need it makes them a highly convenient mode of payment on a mobile payment platform.
- An Alternative to Linking Bank Accounts: A credit card and debit card come linked to an account, which is not the case with prepaid cards. Consumers don’t need to link a bank account to be able to use a prepaid card, making it a safe option for online shopping since no financial data is being shared with the mobile payment solution.
- Secure Mode of Payment: Privacy is a huge concern these days, and consumers are extremely wary of sharing financial data on mobile payment platforms when shopping online. The anonymity that comes with prepaid cards is unmatched when compared to using a debit or credit card.
Offering the option to pay via prepaid card to your customers can increase customer loyalty and build a base. It’s a win-win situation for all, your customers get the option to shop without sharing financial data, and you don’t need to invest in additional hardware or software while tapping into a bigger pool of consumers. So, if your mobile payment system is still to open up to the prepaid card, it’s high time to enable that feature!