6 th Annual Prepaid Assessment Measuring The 2008 Prepaid Market

Transcription

1 6 th Annual Prepaid Assessment Measuring The 2008 Prepaid Market Reviewing Three Reports: Open Loop Assessment Published August 2009 Closed Loop Assessment Published September to 2012 Forecast Report Soon to be Released Tim Sloane Brent Watters

2 2008 Overview Measuring the load, growth and market dynamics of the entire prepaid market. 2

3 Total Dollars Loaded On All Prepaid Products 2008 Total Dollars Loaded On All Prepaid (in Billion $'s Loaded) $ % $ $ $ % 19.7% 13.0% $ $ $ $ $ Closed Open $50.00 $- $60.42 $9.81 $15.49 $27.89 $

4 12 Prepaid Categories, 33 Prepaid Market Segments Open Closed Mixed Cash Access Travel Open Money / Financial Services Open Gift Remittance / P2P Business Time & Expense Business Travel Events & Meetings Employee/Partner Incentives Consumer Incentives Relocation Card Campus Digital Content Digital Media Net Phone Games & Ring Tones Gift Cards (Store) In-Store Sales Distributed Sales Government Social Security Food Stamps TANF Court Ordered Payment Prisons Transit (Tolls & Light Rail) State Unemployment Insurance Casualty Claims Payroll & Benefits Payroll Benefits FSA / HSA Petroleum Purchasing Utilities Telecom Prepaid Mobile Prepaid Long Distance Prepaid Home Dial Tone Prepaid Internet Dial Up 4

5 12 Prepaid Categories, 33 Prepaid Market Segments CONSUMER FUNDED Travel Open Money & Financial Svcs Open Gift Cards Money Remittance / P2P Campus Digital Media Net Phone Games & Ring Tones In-Store Distribution Court Ordered Payment Transit (Tolls & Light Rail) Petroleum Utilities Prepaid Mobile Prepaid Long Distance Prepaid Home Dial Tone: Prepaid Internet Dial Up CORPORATE FUNDED Business Travel Events & Meetings Employee & Partner Incentives Consumer Incentives Relocation Card Insurance Payroll Benefits FSA/HSA Tax Deferred Programs Purchasing GOVERNMENT FUNDED Social Security Food Stamps & WIC TANF Prisons State Unemployment 5

6 Analysis of Open & Closed Loop Funding Sources % of Total Load By Funding Source (Open & Closed) 60% 50% 40% 30% 20% 10% 0% 55% 33% 12% OPEN & CLOSED 2005 ($165.5B) 55% 29% 15% OPEN & CLOSED 2006 ($198.8B) 57% 26% 17% OPEN & CLOSED 2007 ($219.9B) 56% 26% 18% OPEN & CLOSED 2008 ($247.7B) Consumer Funded Government Funded All Corporate Disbursements 6

7 Dollars Loaded On Closed Loop Prepaid Products 2008 US Closed Loop Prepaid Market Growth (in Billion $'s loaded) $ $ $ $ % $ % $ % $ % $ $ $ $ $80.00 $60.00 $40.00 $20.00 $

8 US Open Branded Prepaid Market Size & Growth (In Billions of $) US Open Branded Prepaid Market Growth (in Billion $'s Loaded) $70.00 $60.42 $60.00 $50.00 $ % $40.00 $ % $30.00 $20.00 $ % $ % $10.00 $

9 Forecast of Open Money & Financial Services Growth (In Billions of $) Review Of Open Loop Money & Financial Services Growth Load 2004 Load 2005 Load 2006 Load 2007 Load 2008 Load 9

10 Forecast of Open Loop Social Security Disbursements (In Billions of $) Forecast Of $ Load On Social Security Open Loop Cards $ B 15 $8.7B (e) 2010(e) 2011(e) 2012(e)

11 Analysis of Open Loop Funding Sources % of Total Load By Funding Source (Open Only) 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% 30.3% 0.5% 69.2% OPEN 2005 ($15.5B) 29.4% 4.8% 65.8% OPEN 2006 ($27.9B) 34.0% 7.0% 59.0% OPEN 2007 ($40.7B) 37.8% 11.7% 50.5% OPEN 2008 ($60.4B) Consumer Funded Government Funded All Corporate Disbursements Open Loop Segments Loaded By Consumers in 2008 % of Total Load By Funding Source (Open & Closed) 60% 50% 40% 30% 20% 10% 0% 55% 33% 12% OPEN & CLOSED 2005 ($165.5B) 55% 29% 15% OPEN & CLOSED 2006 ($198.8B) 57% 26% 17% OPEN & CLOSED 2007 ($219.9B) 56% 26% 18% OPEN & CLOSED 2008 ($247.7B) Consumer Funded Government Funded All Corporate Disbursements $12,000,000, $10,000,000, $8,000,000, $6,000,000, $4,000,000, $2,000,000, $0.00 $8,542,483, $8.5 B Travel, Open Gift. Store Labeled Gift On Travel Open& Gift $10,879,111, $10.8 B GPR, Remittance & Campus GPR, Remittance, Campus $3,416,810, $3.4 B Court Payments Payments, & Transit Transit 11

12 $ Load On Network Branded Prepaid Cards For Government (In Billions of $) $ Load On Open In Government Category (Billions) Social Security TANF Court Ord Payment Transit State Unemployment

13 Retail Drives Adoption, With Room For All To Grow Mercator Advisory Group Primary Data Service conducted an online consumer survey against a national sample of 1,012 online consumers, completed between May 28 and June 4, Prepaid Card Purchases In Last 12 Months (base = all respondents) Prepaid Card Types Purchased (base = purchased 1 or more gift/prepaid cards per category) Purchased any prepaid card 45% 76% 39% 20% 20% 18% Have not purchased prepaid card 55% Specific retailer gift/prepaid cards General purpose gift/prepaid cards Prepaid phone cards Reloadable prepaid cards Gift cards for online services 13

14 Segments Participating In Prepaid Malls $1.4 > Petroleum $17.0 > Prepaid Mobile $3.7 > Prepaid Long Distance $.01 > Prepaid Home Dial Tone $.12 > Prepaid Internet Dial Up $.65 > Travel $2.2 > General Spend / Financial Services $5.0 > Open Gift $1.2 > Remittance / P2P $3.8 > Digital Media $.03 > Net Phone $2.8 > Games & Ring Tones $5.0 > Distributed In-Store Gift Cards A First Data Company 14

15 Mapping Distribution Channel Activity Long Distance = 1% of Entire Prepaid Market % Long Distance sold via % Long Distance sold via Web Aggregators (online malls) % Long Distance sold via direct B2B % Long Distance sold via Prepaid Malls Wireless = 7.3% of Entire Prepaid Market Prepaid Malls % Financial Cards sold via Financial Cards (Open Gift & Open GPR) GPR / Gift = 6.7% of Entire Prepaid Market % Financial Cards sold via % Financial Cards sold via % Financial Cards sold via Prepaid Malls These We Have In Detail Gaming & Content = 3.2% of Prepaid Market % Gaming & Content sold via % Gaming & Content sold via % Gaming & Content sold via % Gaming & Content sold via Prepaid Malls Gift Cards (closed loop) = 28.3% of Prepaid Market % Closed Loop Gift sold via % Closed Loop Gift sold via % Closed Loop Gift sold via % Closed Loop Gift sold via Prepaid Malls 15

16 Primary Prepaid Mall Segments Long Distance = 1% of Entire Prepaid Market % Long Distance sold via % Long Distance sold via Web Aggregators (online malls) % Long Distance sold via direct B2B % Long Distance sold via Prepaid Malls Wireless = 7.3% of Entire Prepaid Market Prepaid Malls % Financial Cards sold via Financial Cards (Open Gift & Open GPR) GPR / Gift = 6.7% of Entire Prepaid Market % Financial Cards sold via % Financial Cards sold via % Financial Cards sold via Prepaid Malls Publish Next Quarter Gaming & Content = 3.2% of Prepaid Market % Gaming & Content sold via % Gaming & Content sold via % Gaming & Content sold via % Gaming & Content sold via Prepaid Malls Gift Cards (closed loop) = 28.3% of Prepaid Market % Closed Loop Gift sold via % Closed Loop Gift sold via % Closed Loop Gift sold via % Closed Loop Gift sold via Prepaid Malls 16

17 Primary Prepaid Mall Segments Long Distance = 1% of Entire Prepaid Market % Long Distance sold via % Long Distance sold via Web Aggregators (online malls) % Long Distance sold via direct B2B % Long Distance sold via Prepaid Malls Wireless = 7.3% of Entire Prepaid Market Prepaid Malls % Financial Cards sold via Financial Cards (Open Gift & Open GPR) GPR / Gift = 6.7% of Entire Prepaid Market % Financial Cards sold via % Financial Cards sold via % Financial Cards sold via Prepaid Malls These We May Have Next Year Gaming & Content = 3.2% of Prepaid Market % Gaming & Content sold via % Gaming & Content sold via % Gaming & Content sold via % Gaming & Content sold via Prepaid Malls Gift Cards (closed loop) = 28.3% of Prepaid Market % Closed Loop Gift sold via % Closed Loop Gift sold via % Closed Loop Gift sold via % Closed Loop Gift sold via Prepaid Malls 17

18 PDS Primary Data Establishes Channel Preference From Consumer Perspective. Will Retailer Surveys Conform? 68% Locations Used To By Gift Cards Of Any Type In The Last Year (base = purchased gift/prepaid cards in last year) 45% 14% 7% 5% Purchased from a retailer's own store Purchased from a gift card display at another retailer From a retailer's own web site From a bank (branch or online) From a web site that sells a wide variety of prepaid cards Data also shows channel selection is highly related to product type purchased. Notes: Bullet points statistically significant differences p.<=.05, 11% of respondents noted other channels than those noted above 18

19 Some Intelligence Exits Regarding B2B Sales Long Distance = 1% of Entire Prepaid Market % Long Distance sold via % Long Distance sold via Web Aggregators (online malls) % Long Distance sold via direct B2B % Long Distance sold via Prepaid Malls Wireless = 7.3% of Entire Prepaid Market Prepaid Malls % Financial Cards sold via Financial Cards (Open Gift & Open GPR) GPR / Gift = 6.7% of Entire Prepaid Market % Financial Cards sold via % Financial Cards sold via % Financial Cards sold via Prepaid Malls Gaming & Content = 3.2% of Prepaid Market % Gaming & Content sold via % Gaming & Content sold via % Gaming & Content sold via % Gaming & Content sold via Prepaid Malls Gift Cards (closed loop) = 28.3% of Prepaid Market % Closed Loop Gift sold via % Closed Loop Gift sold via % Closed Loop Gift sold via % Closed Loop Gift sold via Prepaid Malls 19

20 Open Versus Closed Loading For The Two Incentives Segments (In Billions of $) Consumer Incentives $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $- Closed Open Employee & Partner Incentives $12.00 $10.00 $8.00 $6.00 Closed $4.00 $2.00 $- Open Open Closed Processors reported $3.3 Billion RAN-based solutions in

21 Prepaid Market Forecast 21

22 Forecast of Total Dollar Load On Open & Closed Prepaid Through 2012 US Prepaid Forecast to 2012 (in Billion $'s loaded) $300.0 $292.0 $250.0 $200.0 Open CAGR 47.91% Closed CAGR 5.33% $179.6 $171.2 $187.2 $196.4 $143.3 $207.3 $219.6 $207.9 $233.8 $150.0 $94.0 $100.0 $50.0 $27.9 $40.7 $60.4 $ Open Loop Closed Loop NOTE: CAGR Based on 2006 to

23 Random Research Observations 23

24 24 Program Managers Role Becoming Complex & May Be Creating New Prepaid Species GPR products increasingly looking online-banking sites offering Bill Pay, Savings, Credit, and budget management tools. Payroll is now less about Payroll Cards and more about delivering an Electronic Payroll Solution, including Direct Deposit and reporting. Example: Money Networks / Wal-Mart converting to all electronic Payroll. Incentives market is evolving more slowly, primarily because the market is less homogeneous. Still, incentive program managers differentiate through card production, load options, instant sweepstakes, and other features that few processors and issuers support off-the-shelf. If new entrants can t find a processor that delivers all they need then integration of multiple 3 rd party products increases cost / time to market.

25 25 Rewards & MFDNs Are Coming Fast Merchant Funded Discount Networks are on the rise EDO Facecard Current (Teen Card) by Discover MasterCard & Visa Merchant Discount Programs EZ Exchange Many more are in the works from major suppliers GPR, Payroll, and even some Government programs are moving to implement Rewards and Merchant Funded Discount Networks Rewards offerings that are not funded by merchants will be at a disadvantage to good MFDN offerings. Not all MFDN implementations are good: Improves with number of active cards. Improves based on market intelligence and merchant engagement Value Chain must be minimized to drive margin Processors, such as I2C, have baked Tools to Create MFDNs into the Program Management Console.

26 Innovations & Market Shifts Are Altering the Prepaid Landscape Mobile Messaging Now, Mobile Apps Soon, Mobile Payments Later Closed Loop and Open Loop POS Integration Closed Loop Loyalty Solutions Closed Loop Incentives Enhancements Open Loop IIAS Open Loop RAN & SKU for Rebates Hope for a Single Ubiquitous Reload Solution is Dead There Needs To Be Greater Sophistication Used To Segment the Unbanked & Underserved Markets (new entrants intend to address this) Money Order Phase Out Over 5-8 Years Increases Prepaid Card Opportunity Source: Mercator Advisor Group 26 26

27 27 Continuing Mercator Advisory Group Research This 2009 Prepaid Benchmark was the sixth annual measurement of total dollars loaded on 33 prepaid segments (for CY 2008), this will be repeated for 2009 in 2010! Distribution Survey to all distributors of prepaid malls and to merchants who operate prepaid malls. Results will identify the dollar volume of each product category through prepaid malls. Merchant Issuer Survey to all major closed loop prepaid card issuers to identify the volume of sales performed by each issuer through the following five channels; a) The issuers own store, b) The issuers web site, c) aggregator web sites, d) Distributor locations, e) Direct B2B sales. Additional Primary Data Service consumer research will continue to study consumer usage and preferences related to prepaid cards and mobile adoption and help triangulate results received from card issuers and prepaid mall operators.

28 28 Questions (PLEASE!)