Business Research & Analysis
Travel prepaid cards have posted strong growth in recent years, a trend which is expected to continue over the forecast period. The category has been growing due to increased adoption by both retail and corporate international travelers. Owing to its popularity (as it fixes exchange rate fluctuations other than offering secure transactions), there have been a series of launches in this segment. Lack of tight regulatory scrutiny (unlike payroll cards) is also driving new entrants, resulting in higher degree of flexibility and innovation for consumers. According to PayNXT360, travel cards are expected to be one of the key drivers of growth for Global openloop prepaid cards.
In the past few years, international travel has grown steadily for both business and leisure. United Nation’s World Tourism Organization (UNWTO) estimates that global international tourist arrivals reached close to 1200 million by 2015. Tourists from China, US, Germany and the UK are some of the top spenders that drive international tourism expenditure. Travel card issuers are therefore expected to increase focus on these regions, especially China, to encourage growth of the card category. Business travel is estimated to have a higher share in international tourism vis-à-vis retail customers and this trend is expected to continue in the forecast period as well. Consequently, card issuers are likely to focus on designing products that aid corporate customers in monitoring and restricting employee travel expenditure and automating processes to ensure easier auditing of expenses. Card issuers are adopting different strategies to attract customers and drive growth. These include leveraging technology to offer competitive pricing and convenience to customers and targeting niche customer segments such as frequent flyers or people going for pilgrimage. Travel prepaid cards are gaining momentum in emerging markets such as China, India and Philippines where travellers’ are increasing spend on shopping. There are countries such as Australia, Thailand and Singapore who have designed regulatory framework that supports this trend,enabling companies to target consumers from these regions. Leading airline companies are leveraging their strong position in the travel and tourism industry to launch their own branded travel cards that are integrated with loyalty programs. By combining loyalty programs and travel cards, card issuers aim to attract and retain customers by providing them benefits that enhance overall service quality and creates differentiation from competition. PayNXT360 expects more airline companies to introduce branded travel cards over the next five years as part of their broader business strategy of customer retention and engagement. The segment still faces certain drawbacks related to fee structure which is decreasing its pace for mass adoption. Charges related to activation and cancellation, ATM withdrawal and inactivity causes consumer dissatisfaction to a certain extent.
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