Mercator Forecast: Economy Affects Growth of Prepaid Segments, Open-Loop to Hit $337.8 Billion by 2017 (Nov. 17, 2014)
A fluctuating economy has made for a more dynamic prepaid market, benefiting some segments and causing slower growth in others, according to Mercator Advisory Group’s “11th Annual U.S. Prepaid Cards Market Forecasts, 2014-2017.” Mercator predicts that total loads on open-loop cards, which include GPR, payroll, open-loop gift and unemployment benefits, will have a compound annual growth rate (CAGR) of 9 percent through 2017, reaching a total of $337.8 billion. Total dollars loaded on closed-loop cards, which include retailer gift cards, transit fare cards and government nutritional benefits, will slow from a previously forecasted 2.6 percent CAGR to 2 percent through 2017, reaching a total of $328 billion.
The growth rate in open-loop loads in several sectors has slowed, including unemployment, Social Security and Temporary Assistance for Needy Families (TANF) cards, according to Ben Jackson, director of Mercator’s prepaid advisory service and author of the report. “The slower growth in unemployment and TANF result from the improving economy as people return to work and benefits run out for some recipients,” Jackson tells Paybefore. The fastest-growing open-loop segments include money and financial services, or GPR, cards, which are benefiting from increased adoption by people with bank accounts, new products coming into the market and cards issued in conjunction with flexible spending and health savings accounts, he says.
In the closed-loop category, retailer gift card loads actually fell by 11 percent in the past year to $85.8 billion, and that might be due to people shifting from gift cards to other kinds of gifts, Jackson says. The decline—the first Mercator has recorded—represents total loads across retailers, but loads were not down across the board. Loads on cards for gas stations tend to fall with the price of gas, but the digital content category promises to be a fast-growing segment, he adds.
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