Reward and loyalty prepaid credit card programs
Contact-less payment technology has the potential to further develop the prepaid card market in the UK. Contactless payments are highly convenient and fast which makes them a powerful substitute for cash. In the US contact-less payments are growing rapidly mainly in the credit card market. The model for contact-less payments in the US is to bolt on the technology to the existing card payment infrastructure which uses online authorisations. Contact-less payments have opened up the market for small value transactions where speed is critical allowing merchants such as McDonalds to accepting credit cards.
In the UK where we now have chip & PIN for credit and debit card transactions, the model for contact-less payments is more likely to be suited to prepaid and pre-authorised debit transactions. In the short-medium term the lack of cardholder verification for contact-less payments means that cardholders may prefer to use a controlled prepaid account for small, low risk payments and chip & PIN for bigger, higher risk transactions. Card technology already exists to support both contact-less and Chip & PIN payments using dual chip or dual-interface chip cards. The Oyster contact-less payment system is seeking to expand into the small value payments market from its London hub via a partnership with a bank. It seems logical to assume that the banking partner may look to enter the prepaid market using the Oyster contact-less payment system and become the first mover to develop credit/debit/ prepaid hybrids. Oyster potentially poses a threat to Visa and MasterCard in the UK contact-less payments space and could establish themselves as the dominant prepaid payment brand.
