Anyone who has bought a gift card is familiar with the concept of a prepaid account: You must load funds before you can spend them. But the prepaid market has come a long way from its humble origins as a phone card or a gift card. Prepaid accounts are now a key ingredient of modern financial services, powering a rapidly growing number of use cases and solutions, from person-to-person (P2P) payments to lending to efficient digital disbursements. Also, “prepaid” no longer means only a physical card — it can be a virtual account that may or may not have a physical card associated with it at all.
This brief primer report outlines the key design choices innovators in financial services must make when considering a prepaid-based program, such as:
- Deciding between a closed vs. open-loop system;
- Having in mind a clear use case and program value from the start;
- Designing a profitable solution that most effectively addresses customer needs, given the competitive and regulatory environment.
Given the complexity of choices, multiple players in the payment industry need to come together to design and deliver a successful prepaid program. Nobody can do this alone, and choosing the right partners is critical. We also describe the key characteristics and capabilities prepaid program owners should seek from partners to ensure their program is a success.
