Fed Study Shows Prepaid Growth Slowing
Prepaid cards accounted for 9.9 billion transactions and $270 billion in spending volume in the U.S. in 2015—an increase of $600 million since 2012—but prepaid growth is slowing as the products become more mainstream, according to a study from the Federal Reserve. Based on survey data from financial institutions, card networks and payment processors, the Federal Reserve Payments Study 2016 found that card payments—including credit, debit and prepaid—accounted for more than two-thirds of all noncash payments in the U.S. from 2012 to 2015. Over that period, the number of card payments increased by 19.9 billion transactions, with non-prepaid debit transactions jumping by 12.4 billion, credit card payments up by 6.9 billion and prepaid up by less than 1 billion. From 2009 to 2012, by comparison, prepaid transactions increased by a whopping 5.9 billion, according to the previous edition of the Fed Payments Study.
GPR cards accounted for the vast majority of the growth in prepaid transactions from 2012 to 2015, the Fed report found. There were a total of 3.7 billion GPR transactions in the U.S. in 2015, an increase of 600 million over 2012. GPR spending volume was $125.8 billion in 2015, up from $108.5 billion in 2012. However, the growth rate of GPR transactions has slowed; from 2009 to 2012, GPR transactions surged by 1.8 billion, according to the Fed. The average annual growth rate for GPR from 2012 to 2015 also was much lower than the preceding three years, at 5.6 percent to 34 percent, respectively.
Among other prepaid verticals, private-label prepaid cards issued by merchants, such as gift cards, saw transactions decline slightly from 3.7 billion in 2012 to 3.6 billion in 2015. However, the overall volume of private-label prepaid card payments actually increased over that period, from $50 billion in 2012 to $70 billion in 2015—meaning the average value of private-label card payment increased from $13 to $20 over those three years. Meanwhile, prepaid benefit card payments ticked up to 2.6 billion in 2015 from 2.5 billion in 2012, the report found. Overall transaction volume for prepaid benefit cards also rose over that period, from $70 billion to $80 billion.
The Fed report also offered insight into early adoption levels of EMV chip technology. The number of transactions using EMV-equipped cards increased by an annual average of 230 percent per year from 2012 through 2015, but still only accounted for 2 percent of all in-person card payments in 2015. However, the payment networks’ October 2015 fraud liability shifts have accelerated merchant and issuer takeup of EMV in the period since, according to several studies following the liability shift.