Mercator Forecast: Prepaid Growth Expected to Slide (Oct. 31, 2013)
Growth of the open- and closed-loop prepaid card markets will be slower than previous years as the industry weathers a stubbornly sluggish economy and regulatory uncertainty, according to Mercator Advisory Group.
Total loads on open-loop cards, which include GPR, payroll, open-loop gift and unemployment benefits, will drop from a previously forecasted 21 percent compound annual growth rate (CAGR) to 6.9 percent through 2016, reaching a total of $254.3 billion, Mercator predicts in its “10th Annual U.S. Prepaid Cards Market Forecasts.”
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 5 percent CAGR to 2.6 percent through 2016, reaching a total of $343 billion.
Ben Jackson, senior analyst with Mercator and co-author of the market forecast, points to legal action involving the Durbin Amendment as an example of challenges facing the prepaid industry, particularly the recent decision by U.S. District Judge Richard Leon that the Federal Reserve Board of Governors overreached in its interchange and network routing rulemaking.
“While the Federal Reserve has appealed that case, it remains to be seen whether providers will see interchange drop again and whether they will be forced to add unaffiliated networks for each authentication type,” Jackson tells Paybefore.
Be sure to read next week’s Pay Update for more of Mercator’s industry analysis.