According to a recent Leger survey 6 in 10 Canadians are aware of reloadable open-loop prepaid cards and 73% who have used the cards have expressed satisfaction. 55% of Canadian consumers would consider using an open-loop prepaid card, after learning about the benefits.
According to the Canadian Payments Association, prepaid cards (open- and closed-loop) payment values grew at a rapid rate of about 47% in 2012. Open-loop prepaid cards payment volumes have more than doubled since 2008, surpassing ABM volumes and reaching about half the volume of cheque payments.
In June 2016, the CPPO released the first-ever benchmark study conducted by Mercator Advisory Group entitled, Canadian Open-Loop Prepaid Market: 2015, that reveals the open-loop prepaid card market in Canada reached CAD$ 3.1 billion in total dollars loaded onto cards. The Canadian open-loop prepaid market has eight active segments compared to 17 in the U.S., showing significant growth opportunity for prepaid programs in Canada. The Canadian market is expected to follow U.S. trends, where open-loop prepaid cards are the fastest growing form of electronic payment. Mercator Advisory Group reported that the total load value in the U.S. reached USD$ 264 billion in 2014.
For consumers, open-loop prepaid cards provide an electronic payment that is not credit and does not require a bank account. The funds can be used immediately, with no need to wait for cheques to arrive by mail or to clear at the bank. They are also an excellent tool to manage a household budget or provide a spending allowance to a college student. According to a recent survey by Mastercard Canada, one in four consumers is likely to use a general purpose reloadable prepaid card as a complement to their regular bank account in order to shop online, manage their spending, diminish their fears about fraud and identity theft, and reduce their reliance on cash.
Canadians are looking for new ways to manage their finances to avoid debt, fees and interest. According to a recent survey by Leger, 33% would rather not have a credit card and 40% want a payment card with a set spending limit.
Paper is Expensive
For businesses and governments, using paper cheques can be extremely costly. According to the Canadian government, cheques cost .82 cents to issue versus .13 cents for an electronic payment. There is the cost of the cheque itself, as well as envelopes, postage, and any additional paper that must accompany the cheque. Other costs that come with paper-based payments include the production handling, distributing and reconciling of cheques, as well as managing any lost or stolen cheques. Moving to prepaid cards can greatly reduce or even eliminate many of these costs.
Reduce Canadian's Debt and Meet the Needs of the Unbanked and Underbanked
Many consumers who are “unbanked” or “underbanked,” use expensive alternative financial services providers such as payday lenders, cheque cashers and pawnshops to manage their finances. With Canadian levels of consumer debt reaching $1.529 trillion at the end of 2014, according to a recent report published by credit monitoring firm Equifax Canada, open-loop prepaid cards can help this population manage their budget, save money and make purchases with ease.
Canadians Embrace Emerging Payments
According to a recent report by the Canadian Bankers Association, 90% of Canadians embrace innovation in banking.
Canadians have embraced mobile commerce and digital wallets, and according to the Mastercard Payments Readiness Index, Canada is the world’s second-most “ready” country for mobile payments. Canada is accepting of new ways to pay, like open-loop prepaid cards, and is ready for innovation in prepaid payments.
Canadians Have High Levels of Awareness with Open Loop Prepaid Cards
Recent research by Leger provided some valuable insights into Canadian consumer’s experience with open-loop repaid products:
- 61% are aware of reloadable, open-loop prepaid and 73% of its users express satisfaction
- 64% are aware of single use, open-loop prepaid and 76% of its users express satisfaction
- This compares to a 70% satisfaction rate across all demographics and incomes levels in the U.S. — according to a recent GfK survey
- Consumers indicate that the key benefits of open-loop prepaid cards are high acceptance and protection against loss or theft, day-to-day payment convenience and set spending limits.