Study: Canadian Open-Loop Prepaid Market Grows 17 Percent

Canadian Prepaid Providers Organization (CPPO) releases annual study showing the open-loop prepaid card market has topped CAD$3.6 billion

Toronto, ON – November 7, 2017 – The Canadian Prepaid Providers Organization (CPPO) today released its annual benchmark study, entitled Canadian Open-Loop Prepaid Market: 2016, that shows 17 percent growth of the open-loop prepaid card market in Canada between 2015 and 2016. Growth in all nine active segments of consumer-, corporate- and government-funded cards drove the market to CAD$3.6 billion in total dollars loaded onto cards. The study was conducted by Mercator Advisory Group.

“The Canadian open-loop prepaid market has experienced healthy growth in both total transactions and expansion into new segments that have been robust in other countries,” said Tim Sloane, vice president payments innovation, Mercator Advisory Group. “This data shows that open-loop prepaid products are becoming the go-to alternative to replace cheque payments for corporations and governments. There is also significant traction with consumers using the products as a tool that supplements their bank account.”

Key findings from the study revealed:

  • General-purpose reloadable card (cards loaded by consumers for personal finance use) loads total CAD$1.8 billion and the average load onto consumer-funded cards is CAD$649.
  • Open-loop gift card loads total CAD$1 billion.
  • The corporate incentive category is growing with CAD$189M in total loads. The segment remains small versus the U.S. market showing strong potential for growth.
  • The average load onto corporate-funded prepaid cards grew 11 percent, from CAD$125 to CAD$140, reflecting increased adoption by Canadian businesses to move cheque payments to prepaid cards.

“Open-loop prepaid products continue to take a bite out of cheques, improving efficiencies, costs and security in the Canadian payments system,” said David Eason, CPPO chairman. “This data from the survey shows increased adoption across new categories and deeper into established verticals, but it also highlights the untapped potential for prepaid in Canada.”

Corporations and governments are replacing the costs and security concerns of paper cheques by expanding their use of prepaid cards across corporate disbursements, payroll, healthcare disbursements, disaster relief, student cards and employee incentive programs. For example, the Ontario Government provides prepaid cards for social assistance as part of its plan to enhance social assistance, improve customer service and make programs work better for consumers. The Alberta government provided prepaid cards to victims of the Fort McMurray fires to get them financial relief safer and quicker than by cheque.

Upstart fintech companies have tapped into the demand from younger Canadians and gig economy workers to have quicker access to their money through prepaid cards. Koho offers an instant spending account and Instant Financial replaces paycheques and direct deposits for employers, so they can lower their costs and pay workers quicker.

Financial institutions are expanding their services to remote and underserved communities via prepaid cards. The North West Company’s open-loop reloadable prepaid card program offers direct deposit of government benefits onto prepaid cards. Additionally, Payment Source offers their Loadhub platform, which can integrate directly into a merchant’s card processor allowing for instant card loads onto prepaid cards using cash or debit at more than 6,000 Canada Post locations.

About The Canadian Prepaid Providers Organization (CPPO)
The CPPO is a not-for-profit organization and the collective voice of the open-loop prepaid payments industry in Canada. It is the only association solely focused on this growing industry and is supported by major financial institutions, card networks and other industry players. The CPPO is focused on awareness and education so that consumers and businesses can have the best experience with these popular products. For further information, visit www.cppo.ca. Connect with CPPO on Twitter and LinkedIn.

About Mercator Advisory Group
Mercator Advisory Group is the leading independent research and advisory services firm exclusively focused on the payments and banking industries. We deliver pragmatic and timely research and advice designed to help our clients uncover the most lucrative opportunities to maximize revenue growth and contain costs. Our clients range from the world's largest payment issuers, acquirers, processors, merchants and associations to leading technology providers and investors. Mercator Advisory Group is also the publisher of the online payments and banking news and information portal PaymentsJournal.com.