The value of digital prepaid card transactions will surge in the next five years, exceeding $3.98 trillion globally by 2028, a new study from Juniper Research has revealed.
According to the research, by 2028, the value of digital prepaid card transactions will represent just under 60% of total prepaid cards spend, up from 15% or a value of $528.7 billion in 2023.
A digital prepaid card is a virtual form of a prepaid card that exists entirely in digital format and can be accessed through a mobile app or online platform. Its popularity will be driven by the growing adoption of open-loop prepaid cards reflecting the greater use of such cards for loyalty rewards; replacing more traditional gift cards.
The report also predicts that open-loop systems, where payments can be made anywhere cards are accepted, will lead to an increasingly blurred line between prepaid cards and gift cards. As a result, the much wider loyalty market will become increasingly addressable for prepaid card vendors, compared with the closed-loop system, where payments can only be made at specific vendors.
Targeting the unbanked
In terms of new growth markets for digital prepaid cards, the unbanked population is a key target since the cards to do not need an account with a financial institution to function. With over 1.4 billion people still unbanked, globally, financial inclusion remains a key issue that can be further tackled by the issuance of prepaid cards along with continued advances in digitalisation. The number of prepaid cards issued digitally is expected to surpass 940 million by 2028, the report said.
“Financial inclusion use cases can significantly accelerate the success of prepaid cards, but vendors must keep the costs very low to ensure prepaid cards remain competitive for these use cases versus mobile money apps or central bank digital currencies,” Research co-author Nick Maynard explained.