Melding into Equilibrium
The evolution of prepaid solutions is moving toward a balanced approach, where physical and digital forms coexist to meet consumer preferences. Despite the rapid advancement in digital technology, physical gift cards continue to be a favorite among consumers at points-of-sale.
Physical gift cards are still valued because they serve as tangible items,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. Consumers enjoy pulling out the card, and while digital options offer convenience, physical cards remain crucial.”
The key to success lies in creating a holistic prepaid strategy that can adapt to both physical and digital environments. Companies need to understand that digitizing physical cards is essential for bridging single-use transactions with recurring use.
Merchants can incentivize customers by allowing them to convert their physical cards into digital ones, promoting self-use through loyalty programs and rewards. Digital and physical cards should be seen as complementary tools in a prepaid program’s arsenal.
The focus is on blending these elements,” Hirschfield added. While digital solutions are critical, the physical aspect remains significant.”
Refilling the Savings Jar
The self-use trend in prepaid products has become a key growth driver, moving beyond traditional gift cards to stored-value accounts. These accounts offer a combination of convenience and rewards that encourage long-term customer engagement.
For retailers, stored-value accounts can significantly reduce transaction fees by consolidating multiple small transactions into fewer larger ones. Loyalty points and rewards programs enhance the customer experience, often leading to additional spending beyond initial incentives.
Loyalty offers in a prepaid card context have the potential to generate $20 or more in additional revenue per $10 reward,” Hirschfield stated. This underscores the value of self-use for both merchants and consumers.”
Digital assets, including cryptocurrencies and stablecoins, are another emerging trend in the prepaid ecosystem. These assets can transform liability-based gift cards into asset-based digital accounts, offering new possibilities for cross-border transactions.
Digital assets could revolutionize prepaid programs by providing secure and versatile payment solutions,” Hirschfield explained. While regulatory challenges remain, the potential benefits are clear.”
The Future of Digital Assets
The integration of digital assets into prepaid programs is poised for significant growth as companies explore their multifaceted applications. From cross-border payments to secure backup accounts, digital assets offer a promising avenue for innovation.
Digital assets can act as an alternative when dealing with at-risk retailers,” Hirschfield noted. In the event of a retailer going out of business, prepaid cards backed by digital assets could be seamlessly transferred to another program.”
The shift from liabilities to assets represents a paradigm shift in how prepaid programs operate. While challenges exist, recognizing the potential impact of digital assets is imperative for future-proofing these initiatives.
