Blog: Consumer Prepaid Saturation in U.K.? (March 2013)

 By David Parker, Polymath Consulting

Are we reaching market saturation for consumer-loaded prepaid programs in the U.K.? Our latest industry research suggests the answer may be “yes.” Polymath has published The Prepaid Report since 2007, tracking the number and types of consumer-loaded prepaid cards programs in the U.K.  Our latest report makes interesting reading because for the second consecutive quarter, we’ve seen a drop in the total number of U.K. consumer loaded prepaid card programs. The main drop has been in the number of GPR programmes: All the big brands are still out there, but a number of smaller entrants have withdrawn. 

This suggests a certain amount of consolidation is underway, evidenced by APS’s (a U.K./European program manager) relatively recent purchase of the small GPR program Blue Sky. Consolidation also is happening on the corporate side, demonstrated by the strong value achieved by CorporatePay—a leading European program manager specializing in the corporate prepaid area, with technology including supplier payments using virtual prepaid cards—in its sale to Wright Express. 

Of course the key questions for consumer-loaded prepaid cards are: At what level is the market sustainable and will we see a further contraction in the number of programs? Polymath’s view is that there has been a small market shakeout. The economy is tight and what’s happening is some of the smaller programs, e.g., 5,000 to 20,000 cards that are really not profitable in the long term, have withdrawn from the market. We still are going to see major brands enter the market or those with significant volume opportunities. In addition, the corporate area has continued to grow and will continue to do so, particularly around process-replacement solutions and potentially new government-led programs.

Number of Consumer-Loaded Prepaid Card Programs – U.K.     

*Polymath stopped counting youth cards as a separate category in 2008. They are included in the general category. 

©2013 Polymath Consulting

Despite the reduction in the number of GPR programs and consolidation of industry players in recent years, the overall number of prepaid programs has nearly quadrupled since 2007. Another interesting market dynamic to watch will be programs coming to market without plastic.  Because Europe is 100 percent EMV for reloadable prepaid cards, putting a card into a consumer’s hand is a relatively expensive process. If this cost can be eliminated, there are significant savings, about US$3 to $4 per acquired customer. This would enable companies to be even more aggressive in promoting prepaid solutions. Other than a few virtual cards, such as NEO from Ukash, or 3V’s paper-based program, we’re currently not aware of any non-plastic or pure “mobile” offerings.

In summary, it could be argued that the long-awaited shakeup of the U.K. market has started. We saw a “gold rush” period, where everyone thought it was quick and easy to launch prepaid and you were guaranteed to make money. There are still some dreamers in the market, but more and more those launching consumer-loaded prepaid programs have thought through propositions much more thoroughly to offer real value to consumers. Some of the early entrants have withdrawn, but at the same time the overall market is still expanding quite fast.

David Parker is the founder and CEO of Polymath Consulting, which works on projects and advises organizations across the cards and payments industry. Polymath Consulting and Parker are particularly well-known for their work on prepaid cards/e-wallets/mobile payments. Parker has worked with companies many geographies and across the complete value chain, helping banks with their overall prepaid strategy right through to market entry analysis; as well as working with telcos, processors and program managers on segment analysis, certification and membership applications. He can be reached at [email protected].

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