September 7, 2013
Prepaid card market in India is expected to grow at a CAGR of around 40% during 2012-2017. Around 17 to 20 per cent of the prepaid cards are accounted by travel cards in India as estimated by Knowledgefaber.
A travel card is a prepaid card which can be used by the consumer overseas to make payments at all Visa/Mastercard enabled PoS. It has to be pre-loaded with money to use. Once the money has been loaded, the currency exchange rate is locked and there are no changes (so monitor currency exchange rates and buy). The payback would be according to the locked exchange rate and not the current one. Thus in a depreciating currency, it would serve to save the consumer valuable money. Big plus for people who need to travel abroad and dollar has crossed 67 rupees mark.
SBI Bank, Axis Bank, ICICI Bank are the some of the major Indian banks to have capitalized on the prepaid travel cards market in India. Some of the other international players in India offering prepaid travel cards include Travelex, American Express, Deutsche Bank, Standard Chartered Bank, HDFC Bank etc.
Another big application is the pain around carrying a wrong currency by mistake to a foreign country (e.g., in Europe). According to a survey by the International Currency Exchange (ICE), one in ten individuals who travel to European countries end up carrying the wrong currency.
Prepaid travel cards eliminate the need for carrying bulk cash and traveller’s cheques, without the hassles of going to money changers, paying commissions and tracking expenses. Currently, most leading banks and travel agencies offer such cards denominated in about 8-10 leading foreign currencies (including US Dollar, GB Pound, Australian Dollar, Canadian dollar, Euro, Yen, Dirham and Saudi Riyals).This feature is especially beneficial to frequent travelers, and individuals who are travelling to different countries during the same trip. There is no time wasted, as the card allows the users to pay directly in any of the available currencies.
A tourist can carry up to $10,000 of foreign exchange, out of which only $3000 is allowed to be carried in the form of coins and notes according to the guidelines provided by the Reserve Bank of India (RBI). Safety is another major concern for consumers travelling abroad. Mahesh Iyer, Vice-President - foreign exchange, Thomas Cook India, said, Any misuse of this card doesn’t give access to the person’s entire bank account, unlike a debit card. And, if the card is lost, we can issue a fresh pin number immediately. The card can be blocked instantly if it is lost. Banks such as ICICI offer both an active and a deactivated card. If an individual misplaces the active card, he can call the bank and get his second card activated. In addition, prepaid cards, have a high level of security as compared to magnetic strip cards, and provide protection against fraud.
LTP View: Benefits of Prepaid travel cards like easy reloading of cash, safety, locked exchange rates, and convenience cannot be ignored. They are more economical than credit and debit cards as they do not charge any amount per transaction unless withdrawing cash from an ATM. Prepaid cards can be used at most PoS and are a lot more convenient than travelers cheques. In an economy like India, with its continuously fluctuating rupee, travel cards can be a boon with their feature of locking the currency rate on the day of exchange.