Digital Payments: New Opportunities for Your Merchants
Today’s consumers are driving a shift away from traditional payment forms and banking relationships to innovative forms of digital payments. It’s an exciting time to be in the electronic payments industry, as payment service providers find themselves right at the center of this transformation. Make sure your merchants and their POS systems are ready to meet these market changes.
The primary driver of change in electronic payments can be summed up in one word: debit. Debit payments outpace credit cards at a rate of 2 to 1, and it continues to rise. The growth in debit has spurred a major FI investment in payment innovations. We are seeing prepaid card innovations that bring real value to both merchants and consumers.
Debit Innovations: A Solution for the Unbanked
Debit innovations are particularly suited to the needs of the unbanked and underbanked. As it stands right now, America’s traditional credit-based payment system is best suited to a very specific population: established consumers with strong credit ratings. This leaves nearly 34 million households who qualify as unbanked or underbanked out in the cold.
Making up 27% of households , unbanked and underbanked consumers lack access to typical bank checking accounts or branded credit cards. Instead these consumers must turn to a patchwork of financial solutions to meet their payment needs, such as payday loans or check cashing services. Unbanked and underbanked households often find themselves in a catch-22. They can’t afford traditional checking accounts, but nontraditional payment services often end up costing them even more in high interest rates and per-incident fees. This drain on already-scarce finances makes it even harder for struggling families to move out of poverty.
Over the past few years, FIs have begun addressing the needs of this population with new products such as low-cost checking accounts, secured credit cards, and best of all - prepaid and reloadable debit cards. More and more, unbanked and underbanked consumers are finding reloadable debit cards make good financial sense. By providing consumers with the flexibility and convenience of electronic payments, reloadable debit cards help to remove one more barrier to financial stability.
Merchant Solutions Prepaid Card Reloading:
Prepaid card reloading services may be an easy and appreciated value-add for your merchants. Consumers can utilize various retail sources to reload their prepaid cards, from large chains like Walmart to family-owned c-stores. Consider developing a partnership with a card loading service to bring prepaid card functionality to your merchants. You may consider Moneygram, Moneypak or even Western Union, among other providers.
Branded Currency: More Than a Gift Card
Another exciting payment innovation is the growth in branded currency (formerly known as gift cards.) The gift card market in the US was valued at $149 billion in 2017, with even more growth expected this year. Your merchants can’t afford to miss out on a share of this revenue.
The fact is, branded currency is much more than just a $20 gift card at Christmas. According to First Data's 2017 Prepaid Consumer Insights study, branded currency “provides consumers with a secure financial transaction option, allows great physical and digital flexibility, garners brand awareness and loyalty, and provides great data tracking.” And considering that 75% of consumers overspend the value on their gift card, it’s an obvious money maker for merchants.
Merchant Solutions: Physical and Digital
It’s smart for payment providers to integrate branded currency into your retail solutions portfolio. Make sure merchants understand how easy it is to offer gift cards, and the added revenue they can expect from new customers, repeat visitors, overspends, and even unredeemed cards.
While it’s easy enough to produce physical cards, be sure to offer your merchants the option of digital gift cards as well. By integrating a barcode reader into the POS system, your merchants can support increasingly popular digital gift cards. Consumers appreciate the versatility of digital gift cards; this growing industry brought in $15 billion in 2017. After all, it’s much simpler to flash a barcode on a smartphone than to fumble through a pile of plastic cards. And with gift card management apps like Gyft, consumers find it easy to organize and redeem their digital accounts.
Debit Choices: Wide Appeal
Prepaid debit cards and branded currency (gift cards) aren’t limited to any one market segment. Just like the unbanked, consumers with good credit find prepaid cards to be a useful and convenient means to control and transfer money without any long-term interest strings attached. And when you combine physical and digital gift cards with purchase discounts and loyalty points, these products are a win for all consumers. Now is the time to build the functionality in your merchants’ POS systems to support these payment innovations.