The Role of Prepaid and Virtual Cards in a Digital Payments Ecosystem

The COVID-19 pandemic has drastically accelerated the development of ubiquitous e-commerce and contactless payment solutions by an estimated 3-5 years.

This was the collective conclusion from a diverse group of payments pundits who discussed the role of prepaid and virtual card solutions in driving digital payments innovation in a recent webinar hosted by FSS and the Canadian Prepaid Providers Organization (CPPO). The group explored the implications of the emergent landscape on prepaid issuers and the new opportunities it presents. Leading these discussions were:

  • Jennifer Tramontana, Executive Director – CPPO
  • Brendan Carley, Director of Regulatory Affairs – Payments Canada
  • Jeremy Nicholls, General Manager, Card Services & Fraud Solutions – Everlink Payment Services
  • Elisabeth O’Neill-Laett, Managing Partner – Holt Accelerator
  • Jose Gutierrez, Director Digital Payments; Labs – Mastercard
  • Jayesh Sawant, VP and Head Payments Practice Canada – FSS Technologies

The webinar panelists discussed in large part how prepaid and virtual card platforms are laying the groundwork for what the future of digital financial services could look like. This includes exploring how stronger industry collaborations will enable fintechs and banks to bring innovative solutions to wider audiences faster, and more secure than ever before.

The pandemic has highlighted the need for greater social inclusion in the digital economy, which has brought prepaid and virtual cards deeper into discussions of how to get money into people’s hands quicker. For example, issuers are investing more in prepaid through opportunities in the growing challenger bank sector because of prepaid’s ability to transform digital B2B payments for enterprises and SMEs.

Use cases are being discovered in the public sector for government stimulus and emergency payments, but also for businesses needing to overhaul their payroll and gig worker payout solutions. Insurance payments for accident payouts is another use case getting attention. Prepaid’s role beyond just gift cards is expanding quickly as organizations learn how its regulatory-friendly tech stack provides a nimble platform for digital payments innovation to deliver solutions that meet more customer’s needs.

Collaborating Across the Canadian Payments Ecosystem

The webinar panelists agreed that the pandemic might just be the event that ignites the momentum toward faster adoption of digital solutions in both B2C and B2B payments.

Jose Gutierrez, Mastercard’s director of digital payments, and Elisabeth O’Neill-Laett, managing partner for Holt Accelerator – a fintech accelerator – agreed that the pandemic has accelerated e-commerce payments solutions 4-5 years and the contactless payments industry at least 3 years.

“Covid has ripped the bandaid off,” O’Neill-Laett said during the webinar. Increasingly, the group agreed, what will drive innovation is greater collaboration across the traditional payments and emerging fintech industries through solutions that appease the desires of regulators, businesses and consumers.

Many Canadian consumers have bank accounts, but lack methods to pay online for goods and services. The pandemic has put pressure on the industry to deliver affordable, accessible digital payment solutions. Jermey Nicholls, Everlink Payment Services’ general manager of card services and fraud solutions, noted that 10% of the Canadian population is still underserved — leaving significant opportunities for prepaid to be a platform for social inclusion in the digital economy.

“It’s all about how you move money into someone’s hands and remove the clunkiness,” said Brendan Carley, Payments Canada’s director of regulatory affairs. Universal payments opportunities are on the horizon as open banking conversations continue, he said, but regulatory challenges are holding that vision back from reaching its potential.

Payments Canada has an advisory task force to support the payments modernization agenda. This includes looking toward the U.K. for guidance, as well as bringing together voices from both the private and public sectors to establish a united front for “moving money and data faster.” The popularity of embedded finance solutions will also ignite these conversations.

“Open banking is a gateway for making all of this happen and for making consumer data sharing work,” Carley said. “But leadership from the federal government is needed.”

More discussions around prepaid’s capabilities will also help highlight prepaid’s role as a prominent payments platform fueling innovative digital banking and payments-as-a-service movements. As the traditional version of analog payments evolve, more robust virtual payment offerings will help prepaid overcome its challenges of the past. Even greater opportunities for prepaid and virtual cards will arise as the need for greater inclusion in the digital economy becomes more apparent as the financial impacts of the pandemic continues.

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