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OPPORTUNITY KNOCKING ACROSS EUROPE

Opportunity Knocking Across Europe

June 6, 2011
Matthew Lanford
By: Matthew Lanford
Matthew Lanford is Head of Prepaid at MasterCard Europe.

The opportunity for prepaid in Europe is phenomenal. A study undertaken in 2010 by Boston Consulting Group on behalf of MasterCard puts the value of the European open loop prepaid market at US$156 billion by 2017, a 26 per cent increase on the value of the market as it stood in 2010.

This growth is not guaranteed. In order to harness this opportunity each participant in the prepaid industry will need to look closely at each individual market and tailor its products to meet the differing needs of consumers throughout Europe.

Recent research commissioned by MasterCard Europe and undertaken by TNS among over 4,000 consumers across the UK, France, Italy, Germany and Poland highlighted the growth opportunities for prepaid across Europe.

Customising prepaid to fit the market

The penetration of prepaid across much of Europe remains low, with just four out of ten consumers holding a prepaid card. This indicates that many consumers are still unaware of the benefits of prepaid and how it can meet their individual needs.

Attitudes to card payment methods vary enormously throughout Europe. While UK consumers have, for example, been thought of traditionally as high credit card users, the financial crisis has hit the UK hard and has put pressure on disposable incomes. These consumers are searching increasingly for a control mechanism to manage their spending and repair their personal balance sheets.

The BCG research reveals that it is the UK consumer's open-minded approach to innovation and new technology, combined with this need to budget more effectively, that helps to explain why the UK is projected to remain the Europe's largest prepaid market, worth an estimated $39 billion by 2017.

In contrast, in Germany, where financial management has always been high on the agenda and is instilled at a very young age, history shows that consumers can be slow to adopt new payment methods, despite having a well developed electronic payment system.

With this in mind, emphasizing the budgeting aspect of prepaid to German consumers may have little impact, while the security that prepaid offers is likely to have far greater resonance. After prepaid gift cards, which are owned by 29 per cent of German consumers, prepaid internet cards are the most popular form of prepaid card, held by 11 per cent of consumers who wish to shop online with the added peace of mind prepaid offers.

The research undertaken by TNS also suggests that prepaid should not be seen as simply another means of payment or a replacement for other payment methods, but a solution that can be adapted easily to relate to consumers' needs, for example, a modern public transport pass, or a tool for budget management.

The significance of the nuances between, and indeed within, European cultures should not be overlooked. For example, in Poland while cash remains king for the older generation the younger generation is enthusiastic about new payment methods and are adopting electronic payments rapidly, creating a wealth of opportunities for prepaid. In Poland two-thirds of consumers (67 per cent) view prepaid as a modern way to pay for goods and services.

In Italy, consumers are focused on budgeting and have traditionally been much slower to adopt new payment methods. Credit cards are used reluctantly but the ability to manage their money more closely and shop online has made prepaid an attractive payment option and the research highlights that Italians are broadly positive about all the benefits that prepaid offers.

According to the research, 56 per cent of Italians own a prepaid card, with 43 per cent holding a multifunction card, a significantly higher proportion that their continental neighbors who are most likely to own a prepaid gift card.

The path to growth

What is clear is that, however the market is being driven, prepaid is a solution which is answering payment needs across the continent. As an industry we have to recognise those trends and respond to them, but we also need to ensure that we are taking the best of what works in one market and using it to drive growth in others.

It is worth remembering that currently, just four out of ten consumers hold a prepaid card. Moving that to just five out of ten will add another 80 million people to the European prepaid community. Our own research panels have shown us that once you can convince consumers of the benefits of prepaid cards they tend to become not just repeat users but also some of the best advocates for our products. It is in all our interests to make sure we are selling the benefits of prepaid in all markets.


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