2012 – The Year of Awkwardly Elegant Partnerships

Monday, 16 January 2012

Another big year in store for prepaid!

Every year is going to be a huge year for Prepaid. The market is expanding, the migration from paper to plastic continues apace, new form factors such as mobile are gaining a foothold and new countries are beginning to embrace the product.

Whilst this year will be no different in so far as the end user experiences it I do believe that there will be a big change behind the scenes. Prepaid is not a cheap business; the infrastructure required to deliver the service is expensive, the resources required to support programmes are extensive and the compliance and financial obligations to be in this space are onerous.

Today there are too many prepaid providers trying to be all things to all people. Many of these companies have survived on either funding raised during the good times or as a subsidiary of a larger organisation. As global economic concerns continue without an end in sight, I think shareholders will need to see payback (or at least a road to payback) for the money spent over the past five years.

An element of ‘right-sizing’ will be required. This is not just about organisational resources such as offices, staff etc. It is about what programme is right for each organisation and what part they play in delivering prepaid to customers. Delivering an SME solution is very different to delivering a Tier 1 solution. Open loop, private label and closed loop are very different. And being a processor or delivering the customer-facing technology have very, very different challenges associated with them.

My view is that 2012 will bring some failures and some withdrawals from the prepaid sector. And while there will be some consolidation (but probably not much given the lack of funds), the most striking aspect will be the number of new partnerships announced, many between organisations that might previously have been perceived as competitive or incompatible.

Could closed loop prepaid be processed on scheme rails under a different commercial and legal framework? Would the closed loop processors come together and offer multi-retailer propositions? Will card manufacturers move to mitigate the migration from card to evoucher?

Speed dating for prepaid anyone? 

It could be fun!

DH