When the O2 money card first came out in 2011 in Ireland it got great traction; within one month of its
launch O2 had sold more than 50,000 cards.
Customers could top-up their cards online through their bank accounts, in
any O2 retail store or in over 1,500 Payzone outlets nationwide. Card balances could be checked at any time online
or via text message. It was positioned as an easy way to manage personal cash
flow and without incurring additional debt.
By 2012, O2 had signed up more than 100,000 customers and
reported over 1.2 million transactions through their cards, citing that 80% were
online purchases with the majority of spend going towards well known music and
book retailers, airlines, online gaming services and supermarkets. 53% of the O2
Money Card customer base were under 35 years old and it was made available to
everyone aged 13 or over. A valuable
customer segment and one which is highly attractive to players in the financial
services market.
Heralded as something
revolutionary in terms of payment options, you would think that this momentum
would have continued and more consumers would have opted to take out prepaid
cards. In reality, this has not been the
case.
A survey conducted by National Consumer Agency in
2012 stated that there were 9 prepaid cards in circulation on the Irish market.
Examples include Swirl MasterCard and Ryanair Cash Passport. The features of prepaid cards vary
significantly, particularly the methods of purchase, operation, fees, terms and
conditions. There is also huge
variation in the charging structures between these products. In some cases they can have up to five
different fees involved in using them for example sign-up fees, top-up charges
and various transaction charges each time the card is used in making a
purchase. Likely consumers are confused
and find it difficult to compare the products on offer, as well as consider
many of them to be poor value
In 2012 it was estimated that there are around
200,000 prepaid card holders however there seems to be little growth, or no
evidence of growth since the initial surge of O2 money card’s success. Competition in the prepaid market competition
is now virtually non-existent, with little or no mass advertising to try to
attract more customers.
This represents a real opportunity, especially in
the financial services sector, to revitalize interest in this type of
service. At a time where consumer trust in banks is very low,
and there is a well-founded fear of accumulating excessive debts, a product
like this is ideal. Add to this the
increasing fee structures for current accounts and you can understand why people
want something different. Consumers are actively seeking new alternatives.
With
prepaid options, consumers can load money onto their cards and use this instead
of incurring fees associated with payment via their Laser or Visa cards. Equally there is no pressure on them to have
a certain amount lodged in their accounts to avoid fees. Instead they can lodge
smaller amounts to the prepaid card and use this.
Due to
this no-debt factor, prepaid cards are often available to the under 18s and the
student segment - younger people who wouldn’t have a credit rating. Again, this represents an ideal opportunity
for financial services companies to develop prepaid products to bolster their
student package offerings and attract this lucrative segment.
If we consider the move towards
a mobile wallet, where brands are offering mobile contactless purchasing
options, then money cards integrated with mobile apps are a valuable and highly
relevant payment option. It is surprising therefore that O2 have not developed
this further.
The
timing is right for a reinvigorated prepaid offering -something straightforward
and easy to grasp. Consumers are
debt-adverse and actively seeking new and inexpensive ways to manage their
money. The market is ripe for a cool
alternative to bank payment products, integrated with mobile apps and wallets,
and leaders in this space would certainly see positive results.
Sources:
Survey of
Prepaid Payment Products, National Consumer Agency, October 2012.
Archived
o2 press releases February 2011 & February 2012.
‘Shoppers warned over high charges for
prepaid cards’, Irish independent Article, March 2012.
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