August 24, 2013
India with more than 40% unbanked population and another big chunk of under-banked population would theoretically present a great opportunity for Prepaid cards. Its a strategist dream to launch a prepaid cash card to enable them make all types of modern payment transactions. But is that really the case on the ground? Since the prepaid cards have been around for a while lets see what is happening.
Recently Beam Money surrendered its license (Authorised entities under winding down process – Position as on August 08, 2013) quoting no cash withdrawals as the biggest hindrance in the current scenario. Prepaid in India remains closed loop or semi-closed loop and therefore limited in usage.
Overall the market has grown in size and volumes but there are challenges companies in this sector are facing. Non-banking card issuers are constrained by 'regulations' while banks are not able to do much because of divided focus (being involved in dozen things) is more on CASA, credit and debit cards instead of prepaid cards. Result = slow growth
A large part of the industry still believes its a great opportunity. India is a land of innovative business models. Entrepreneurs are working hard to still innovate under strict regulations. So players like One 97 (PayTM), Mobikwik, QwikCilver and Flipkart (PayZippy) got prepaid licenses in 2013 (some are getting) to allow customers store money and make transactions online.
Other interesting thing to note is that players such as Zaggle have launched their prepaid cards in partnership with a bank (so you don't need a license) and have focused on understanding market segmentation and what works in India. And came up with Zaggle box office card under its prepaid ocean. a card that be used to buy movie tickets etc. at cinema halls and avail some in-built discounts as well. In a country where people just love the movies its a bright concept.
LTP view: Prepaid is a great concept for a country like India. There have been some new licenses given in the last 12 months or so. There are some new players waiting to enter the market. Others are waiting for the regulations to get relaxed and opening up of the prepaid card system. Network, processors and program managers are definitely in business supporting the eco-system. To understand the prepaid value chain lets look at the following chart