The Prepaid Travel and Transport Opportunity

• Publication date: April 2012
• Report size: 41 pages

Synopsis • This VRL report considers the benefits of prepaid travel cards for travel money issuers • It looks at the evolution of the prepaid card and the potential for future growth • It provides case studies of successful prepaid card schemes • The report examines the current state of national markets and predicted future market share • It highlights key consumer benefits of prepaid schemes Summary...

Synopsis
• This VRL report considers the benefits of prepaid travel cards for travel money issuers
• It looks at the evolution of the prepaid card and the potential for future growth
• It provides case studies of successful prepaid card schemes
• The report examines the current state of national markets and predicted future market share
• It highlights key consumer benefits of prepaid schemes

Summary
Prepaid solutions represent one of the most innovative propositions in the payment industry due to their inherent flexibility, convenience and applications across a broad range of industry sectors. It’s no wonder that banks, payment networks and programme managers have devoted such significant resources and investment into promoting their usage, but each industry vertical requires significantly different business models as end-user groups require different needs, and a one-size-fits-all approach will quickly doom some programmes to failure. In this report we look at two prepaid categories, travel and transit, which although can be broadly classed as similar, actually have very different characteristics and functionality. The schemes discussed in this report concern themselves with the need for travel money, support services for travellers and the means by which transit tickets may be purchased and used. Each of these prepaid card programmes meets a very different need, and exemplifies a core application in the sector. For the sake of clarity, the first half of the report will deal with travel cards, and the second will deal with transit cards. Despite the inherent differences in each category, there is no doubt that prepaid as a solution is ideally suited to serve both, and in this report, we examine the factors that have made prepaid such a win-win proposition in these sectors.

Scope
• This report shows that the benefits for consumers in using prepaid cards are numerous. It is a business model which will continue to gain traction in key markets
• It shows that for new market entrants there is the opportunity to enter a high-value market at low marginal cost
• While these cards should compete with credit cards, the evidence so far is that they are complimentary
• The report focuses on the marketing opportunities presented by the card and its target markets

Reasons To Buy
• Come away with an understanding of why prepaid travel and transport cards are important, and where future growth will come from
• Assess how the cards are used in different markets via a number of case studies
• Look at the innovations which are taking place in the fast moving Asian markets
• The benefits of prepaid cards are itemised and discussed

Key Highlights
• Prepaid transit cards are in their infancy in Europe
• Research commissioned by Mastercard forecasts the open loop prepaid market is expected to reach $156 billion in Europe by 2017, compared with the $22 billion market size in 2010
• The prepaid travel component will become one of the most successful payment markets in Europe with average annual growth of 27%
• A number of case studies are examined, including Travelex, Octopus, and T-Money in South Korea

Credit Card Industry

Table of Contents
Executive Summary
List of figures
List of tables
1. Introduction
1.1 What is a prepaid card?
1.2 The structure of prepaid cards
1.3 Prepaid market segments
1.4 Benefits of Prepaid cards
2. The evolution of prepaid travel cards
2.1 The convenience factor
2.2 Growth of Prepaid card market- Global Perspective
3. The market size
3.1 Prepaid Spend in Europe
3.2 Benefits for consumers
3.3 Discernible benefits for card issuers
3.4 Building customer relationships
3.5 Competing with credit cards?
4. Prepaid travel card case studies
4.1 Case study: Swiss Bankers Travel Cash Card
4.2 Benefits for issuers
4.3 Benefits for customers
4.4 Limitations
4.5 Case study: Travelex
5. The evolution of prepaid transit solutions
5.1 Advances in technology
5.2 The estimated market size
5.3 Benefits for issuers and end-users
5.4 The business case for prepaid transit cards
5.5 Integration of transit and bank technology systems
5.6 The open-loop opportunity
5.7 The closed-loop model
5.8 Revenue sharing potential
5.9 Business case considerations for conversion to contactless prepaid cards
5.10 Transit agency riders and prepaid card programmes
5.11 Maximising income
5.12 Case study: Octopus Card (Hong Kong)
5.13 Case study: T-money, South Korea
5.14 Lessons learned from prepaid programmes
6 Transit card case studies
6.1 Case study: Stagecoach, Liverpool, UK
6.2 Case study: Oyster Card, London
6.3 Case study: MTA New York City Transit (NYCT)
6.4 Case study: Los Angeles County Metropolitan Transit Authority (LA Metro)
6.5 Case study: Utah Transit Authority (UTA), US



List of Tables
Table 1: European pre-paid market segment transaction value by 2017 (€bn)

List of Figures
Figure 1: Growth of Prepaid cards load in Selected countries by 2016 in US$ billion
Figure 2: Growth in selected high growth countries- Prepaid Card load 2010-2016 in US$ billion
Figure 3: Open prepaid market estimated at $840bn by 2017
Figure 4: The Prepaid Opportunity - Three Macro-Verticals
Figure 5: Total Open and Closed Loop Prepaid Spend by 2017
Figure 6: UK, Italy and Russia - Account for more than 50% of Open Loop Opportunity by 2017
Figure 7: UK - Account for 25% of total open loop prepaid spend in Europe by 2017
Figure 8: Gifts and Transit – Greatest opportunity in closed loop by 2017 ($bn)
Figure 9: Swiss Bankers Travel Cash Card
Figure 10: Prepaid Travel Card MasterCard
Figure 11: European pre-paid turnover by 2015 (€M)
Figure 12: European prepaid transaction volume by 2015 (%)
Figure 13: Anticipated geographic location of transits prepaid opportunity by 2015
Figure 14: Octopus Card
Figure 15: The Korean T-Money