Stored Value Cards : Opportunities and trends

1
Stored Value Cards Opportunities and trends
Research
Analysis Sample

• Apr 2005

2
Stored Value Cards continues to be a strong
opportunity to drive business growth
Path KPO Sample Research

• In telecom, adoption of wireless and demographic
  trends like youth/immigration have resulted in
  strong growth of prepaid cards
• Christmas gift cards reported their strongest
  performance so far in the 2004 season
• Stored value cards allow retailers to
• Reward existing customers loyalty
• Attract new customers through gift cards
• Other key opportunity areas include
• Healthcare spending accounts
• Payroll for unbanked workers
• Public transportation
• One-time uses like insurance payments, moving
  expenses
• Atlantic-ACM expects stored value card fees and
  residuals to go up from 800 million in 2003 to
  more than 5.7 billion by 2009
• Financial Insights estimates that payroll card
  transactions will reach 143 B by 2007

3
New features continue to get added to traditional
stored value cards
Path KPO Sample Research

• Value-added Usage
• Tax refund reload
• Remittance to families overseas
• Micro-credit/loan against payday
• Bill payments

JOHN SMITH PAYROLL CARD 8900 9800 8900 980

• Protection
• FDIC insurance
• Zero liability in case of fraud

• Rewards
• Loyalty points on purchases
• Bonus points on higher balance
• Provision to build credit history

4
Legal and regulatory challenges
Path KPO Sample Research

• Whether SVCs can be considered deposits and
  eligible for insurance protection like FDIC
• Whether SVCs are like other depository forms (and
  hence covered by regulation E) or they are more
  like cash
• E.g. Whether a periodic statement requirement
  applies
• Whether SVC transactions should be tracked as
  diligently as other payment forms and whether
  they can be linked to users identity (due to
  concerns like terrorism and money laundering)
• Current regulations do not differentiate between
  the various types of SVCs
• Currently regulations exist both at state level
  and federal level giving rise to confusion at
  times and raising cost of compliance