Business Research & Analysis
Mexico is the second-largest economy in Latin America, after Brazil and has a strong growth potential for Mexico prepaid cards market. Government-issued benefits cards and payroll cards are drivingthe open loop prepaid cards’ growth in Mexico, whereas transport cards and merchant issued gift cards dominate the closed loop prepaid card category. The prepaid card market in Gross Dollar Value terms increased at a CAGR of 29% during 2012-2016. Over the forecast period of 2017 to 2021, the category is expected to record a CAGR of over 20% to reach US$ 29.7billion by 2021.
As per The World Bank’s Financial Inclusion Data / Global Findex, only about 40% of Mexicans aged more than 15 years have bank accounts. This low rate of financial inclusion can be attributed to the fact that about 55% of municipalities in Mexico do not have even a single bank or microfinance institution branch. The Mexican Government is focusing on enhancing financial inclusion in the country through its Financial Inclusion Strategy which seeks to achieve the objective by creating new laws and regulations or amending existing ones, to facilitate private financial services institutions to develop products and services that expand financial reach. Prepaid card issuers can therefore benefit from the initiative to introduce new and innovative products in the market. The Mexican government is also encouraging prepaid card use by utilizing the card category to disburse social benefits. The Mexican economy had to cope with challenges in 2015 that included lower oil prices, depreciating peso vis-à-vis the US dollar, and an overall difficult global economic environment, that led to lower than expected pace of economic recovery. In the coming few years as well the complicated global environment is likely to contain Mexico’s economic growth prospects to a moderate annual rate of growth.PayNXT360’s Global Consumer Survey suggests that in many emerging economies, consumers’ adoption of prepaid cards such as general purpose reloadable (GPR) cards, increases during an economically uncertain time. For instance, in Brazil as well as Italy it was observed that consumers, even those belonging to banked and higher income groups opted for GPR cards to budget their spending and limit fraud potential. With economic uncertainty expected to continue in Mexico, card issuers can promote GPR cards for retail customers as an expense management tool that is both convenient and secure to use. During an economically uncertain time businesses also come under pressure to control their costs and streamline their business operations to improve sustainability and competitiveness. Corporate prepaid cards such as business expense cards, payroll cards, and procurement cards, which help businesses achieve theseobjectives, have significant growth opportunity in the country. Mexico has a significant youth population. The country’s median age is estimated to be 27.3 years, with about 45% of population being under 24 years of age and about 33% of population (almost 40 million people) is between 12 and 29 years of age. This demographic constitutes an important target group for prepaid card issuers. Mexican millennials are highly digital, attributing to more than 50% of the country’s total online population and close to 60% of them owns a smartphone. According to PayNXT360’s Global Consumer Survey results,millennialsare one of the key drivers for prepaid card adoption. This trend is expected to hold true for Mexico as well where the digital savvy millennials are likely to be at forefront of driving prepaid card adoption.
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UK gift cards’ transaction value is estimated to be worth USD 8,589.4 million in 2015, and is expected to reach USD 13,127 million by 2020, recording a CAGR 8.6% during the forecast period. Gift cards are increasingly becoming popular as an alternative to giving presents to work colleagues, friends, and family. It has also been observed that in many cases gift cards are replacing cash gifts during the festive season.
In 2013, more than 100 million gift cards were given as presents for Christmas and in the last quarter of the year most of the companies operating in this sector witnessed a double-digit growth. United Kingdom Prepaid Gift Cards are receiving an impetus from a large number of choices at consumers’ disposal and easy availability through leading retail chains, supermarkets, post offices, and online. Many gift card companies also offer personalization services where messages and images of consumers’ choice can be printed on the gift cards. Most popular gift cards during Christmas are closed loop, branded store gift cards, which account for more than 80% of the total gift cards sold in the UK. However, Global Gift Cards Market Size which posted the highest growth rate are open loop cards that can be used in multiple outlets - across high street retailers as well as online retailers such as Amazon. Open loop gift cards are gaining preference because they provide recipients with many choices to purchase from, ranging from fashion, electrical items, household items, toys and more. Read more Popularity of gift cards in Australia has grown rapidly in the last few years. The gift card market in the country has shown significant growth over the past five years, increasing at a CAGR of 21.3%. The country's gift card market in terms of transaction value is expected to reach US$ 2.8 billion by 2020.The Australian gift card market has become more technology intensive. Over the forecast period, PayNXT360 expects rate of innovation while using gift cards for marketing activities to intensify. While gift cards are predominantly marketed as an alternative to giving presents on special occasions, adoption in corporate sector has been increasing. Businesses are using prepaid cards as part of their broader business strategy, for promotions and to achieve other marketing objectives. Financial services sector has been a late adopter of gift cards but usage has increased over the last couple of years.
Presently, Australia Prepaid Gift Cards in plastic account for 64% market share, as they are preferred while being given as present to family and friends. However, card issuers in Australia are focusing on promoting digital gift card usage as they are finding increasing popularity with millennials, who prefer to make online transactions for a variety of functions including online shopping, and prefer to buy digital gift cards for self-use. Secondly, digital gift cards are difficult to forge, thereby help in reducing chances of fraud.PayNXT360 expects growth in digital gift cards would be crucial for growth of the overall gift card category in Australia during the forecast period. Card issuers in Australia are introducing gift cards, especially targeting millennials and teenagers. Both segments share common attributes in terms of managing financials (approach towards management of finances, savings, and spending) Global Gift Cards Market Size, which is unique from other consumer groups. Given that smartphone penetration in both the segments is increasing rapidly, we expect integrated solutions with prepaid cards combined with mobile application to be launched and drive innovation in the space. We also expect competition to intensify in this segment with players forming partnerships with top retailers to provide exclusive offers for its card users. Integrating prepaid cards with mobile application is going to be a key differentiating strategy for Australian issuers over short to medium term. This is expected to be done for a range of prepaid cards, especially where loyalty programs and other services can be integrated with overall banking services. Travel, gift, and general purpose cards are likely to be key focus areas. Gift cards continue to post strong growth across developed and emerging markets. E-gifting contributed USD 66 billion of sales in 2016 and registered a growth of 24%. Global gift cards market size is estimated to reach USD 570 billion, recording a CAGR of 12.5% during 2017-2021. In developed markets around 82% consumers have intended to purchase gift cards through online or mobile platform during festival / holiday season, while in developing markets this number is around 64%.
Digital Global Open Loop Prepaid Cards are also preferred by people in age group of 18 to 35 years. Majority of consumers prefer storing gift cards on mobile apps for self-use. Mobile gift cards are steadily making progress in terms of adoption and usage worldwide. With new technologies and features, this segment is likely to contribute significantly towards entire gift card segment. Read More The United Arab Emirates (UAE) experienced strong economic recovery in 2014, resulting in resumption of many construction projects which had been stopped during the economic downturn. This led to an influx of foreign workers in the country, which in turn drove demand for prepaid cards such as payroll cards and remittance payment cards. With continuing economic recovery, we expect gift cards to post strong growth over the next five years.
United Arab Emirates Prepaid Gift Cards are poised for strong growth in UAE due to strong consumer demand. Use of gift cards has become mainstream in UAE as consumers are increasingly using the card category to give presents. Gift card market continues to be primarily closed loop in the region, accounting for about over 80% share in 2016. Closed loop gift cards in the UAE are generally merchant branded gift cards from retailers such as Toys “R” Us, Nike, Swarovski, or leading hair salons or spas. Semi-closed loop prepaid cards are also popular as they allow cardholders to make purchases at any store in a specified mall or shopping center. Retailers prefer to introduce their own merchant branded gift cards to increase customer loyalty and brand engagement. However, consumers are increasingly preferring open loop gift cards in the UAE, due to the convenience and freedom of choice they offer. Furthermore, we expect millennials in the UAE to drive adoption of digital gift cards. This is likely to compel more gift card issuers to introduce mobile responsive gift card sites to enable consumers to make purchases using their mobile phones. In particular, digital gift card is going to be a key segment to watch out, driven by online shopping among other factors. Online shopping is quickly gaining popularity among consumers in the UAE,with high awareness amongshoppersregarding the convenience, speed, and security of their transactions. It has been reported that almost 65% of all online shoppers in the UAE are in the age group of 25 and 34 years. Cross-border shopping is showing promising growth in the UAE, Prepaid card market sizewith shoppers making online purchases from countries such as US, UK and India. Typically, online cross-border purchases require card payments and UAE users prefer payment methods which provide them with safety,convenience, and faster checkout. These factors are leading to increased adoption of digital gift cards for self-use. Corporates in the UAE are gradually increasing usage of gift cards to handover incentives. Notably, adoption of gift cards by SMEs is increasing in the country due to increased focus on employee retention and consumer loyalty. PayNXT360 expects usage of gift cards by corporates to steadily increase over the next five years. Many businesses already pay their employees through payroll cards and are familiar with the functions and benefits of the prepaid card category as a whole. We expect businesses to adopt prepaid cards for other functions as well, such as incentivizing customers and employees or utilizing prepaid cards for conducting business transactions or purchases. Global Open loop Prepaid cards have gained considerable traction among not only the unbanked consumers but also with banked and higher income group consumers primarily due to the convenience they offer, enabling consumers to ring-fence their expenses. Over the next four years, PayNXT360 expects global prepaid card market to cross US$ 2 trillion in transaction value terms. Banks as well as non-banking companies such as telecom operators and digital wallet providers are venturing into this space to create an additional revenue stream. Retail customers are the primary target group for card issuers, especially the millennials. Card companies are trying to increase their market share and create differentiation by adding new features to GPR cards, such as mobile integration, designing reward programs similar to credit cards, and leveraging technology to maximize reach.
For developing countries in Asia, Africa and Latin America, where a large portion of the population continues to be digitally and financially excluded, card issuers are rethinking their distribution strategy to reach the prospective consumers. GPR card issuers are collaborating with banking agents to reach the unbanked population at locations most convenient to them. Governments and central banks of emerging economies are encouraging creation of banking agents to reach customers in rural or remote areas to foster greater financial inclusion in their countries. For more Click here Global gift card market size is expected to be around US$ 500 billion in terms of transaction value by end of 2020, recording a CAGR of over 14% during 2017-2020. In the past few years,usage of gift cards has gone beyond the traditional boundaries and new value proposition is emerging both for retail and corporate customers. While in retail segment, gift cards are increasingly being used for self-use by millennials; the card category is being utilized by businesses to strengthen brand loyalty, increase market share, and enhance product and service offering.In particular, below are the three key trends to watch out:
Inorganic growth strategy and further consolidation expected Leading technology firms are looking to consolidate their market position by expanding into new markets and broadening their offerings by opting for inorganic growth through acquisition of companies that provide innovativeproducts and services to gift card issuers. New players are expected to enter the technology platform market to help businesses manage their gift cards programs more efficiently. Furthermore, we expect data analytics services that track and understand consumer behavior to gain popularity as they help in improving ROI for gift cards programs. PayNXT360 expects consolidation in the technology platform space to continue over short to medium term. Established companies are likely to opt for inorganic growth and focus on acquiring start-ups that provide disruptive technologies to capture market share. Evolution of gift card exchanges results in healthy growth of secondary gift card market Secondary gift card market is not yet very popular in emerging markets of Asia, Latin America, and Africa. However, with maturity of gift cards, secondary Australia Prepaid Gift Cards market is expected to evolve and develop in a manner similar to developed markets such as the US and UK. New players are expected to enter the developing market with gift card exchange platforms with the aim to gain first mover advantage and drive growth and innovation in the category. Growing popularity of gift cards has led to an increase in the number of gift card exchange sites being launched in developed markets such as the US and UK. United Kingdom Prepaid Gift Cards exchanges allow cardholders to sell or trade unwanted gift cards. In a typical transaction, users lose some value of the gift card in order to get cash or a card that they actually want to use. In the last few years the gift card exchange service has evolved with new and existing players entering the market with innovative solutions. Loyalty program integration with gift cards is on the rise Integration of gift cards and loyalty programs with mobile phones is expected to be a major differentiator in the next few years. This trend is likely to hold especially true for the African market where mobile money services are very popular and a large population of consumers is comfortable using mobile phones to make transactions. Merchants prefer to issue their own branded closed loop gift cards to increase customer loyalty and encourage repeat purchase. With the advent of digital gift cards, these cards are increasingly being used by companies to track consumers’ purchasing behaviour to be able to better understand customers and to influence their future purchase decisions through personalized marketing. This not only helps in improving revenue generation opportunities but also helps businesses in improving customer loyalty towards the brand. To maximize success of their gift card programs and to keep pace with new technologies and consumer trends, businesses are focusing on continuous improvement and innovation. Global open loop prepaid cards market size is expected to reach USD 1.3 trillion by 2022 which is driven by large section of unbanked consumers across every market, innovative service features, increased adoption of online transactions, and convenient e-payment solutions. Among emerging markets, key countries in Asia Pacific and Latin America have seen steady growth of prepaid cards in past couple of years. One of the popular usage of prepaid cards has been towards international travel, public transport, online or offline retail purchases and as part of rewards system.Recently, transport companies in emerging markets have taken initiative of venturing into open loop prepaid card segment. Below are two key initiatives, explaining this up-coming trend.
Uber Bankaool Debit Card was launched in Mexico in partnership with Uber, Mexican online bank Bankaool and MasterCard which is linked to mobile payment application of Uber. To attract customers, additional benefits were also provided such as first ride free, compatibility with physical retail stores as well as e-commerce sites and fund transfers, and other financial services similar to banking. The Mexico Prepaid Cardsis also now popular which offers some additional benefits to the user. This shows strengthening of payment infrastructure for transport companies along with venturing into financial service segment for alternative business expansion. For more Click Here In 2016, global luxury ecommerce amounted to USD 32.4 billion, and it is expected to reach USD 63.4 billion by 2021 at a CAGR of 14.4%. Simultaneously, gift card in this segment has also witnessed tremendous consumer interest in past two years. Around 38% consumers prefer purchasing electronic items through gift cards, which accounts for majority of the total share, followed by travel, luggage, watches, and apparels. Luxury Australia Prepaid Gift Cards are primarily closed loop cards with a strong focus on brand. Growth in luxury gift card segment is driven by increasing high net worth individuals in growth markets and increased business spend on luxury. Below are key trends:
Digital gift cards have been posting strong growth in recent years, a trend which is expected to continue over the forecast period. This is primarily driven by shift in terms of consumer buying behavior. Digital gifting segment accounted for USD 62 billion sales during last four quarters ending Q3 2016,indicating y-o-y growth of 26%. Consumers have been steadily moving towards digital gift cards from plastic / paper options. Retailers have also acknowledged this trend as sales through digital gift cards has significantly risen in past three years. Around 65% consumers in the market now purchase digital gift cards without any promotions, which is 33% higher than last year figures.
Global gift cards market size are fast gaining prominence across both developed and developing markets as internet and mobile penetration rates increase across the world. The category is being driven largely by millennials as it fits their online and mobile-centric lifestyle. This consumer group is showing preference for digital gift cards as it helps them in accessing online content such as digital music, e-books, and games securely and helps in conducting transactions faster and in a more convenient manner than plastic gift cards. As digital gift cards are a low cost model, the market is seeing entry of many new start-ups and non-financial players, who are eager to be part of this high growth potential market. Fore more click here |
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