Alternative Finances

Solving Global Payments Problems with Prepaid

The key to running a successful prepaid program in any market globally is to develop profitable and ethical business practices,something Amit Sethi dubs “market-appropriate” business models.

And innovation plays a big part in this said Sethi, the co-chairman of the Prepaid International Forum India and managing director for Asia, Middle East and Africa at TSYS in a recent podcast interview with PYMNTS.com Veep Jeff Green.

(Jump to: 8:13) “We can learn a lot from prepaid examples around the world in terms of what works, what doesn’t, what has gained traction in certain markets and why, (and) what benefits and value the [card] customers receive, which is very important,” he said during the interview.  “There are a number of examples out there that we need to share and communicate to prepaid issuers and prepaid markets around the world."

And that is specifically what the Prepaid International Forum is all about. Its purpose is to share best practices and business models that work. And those best practices must adapt to country requirements based on local regulations, business practices, culture and market dimensions, Sethi said.

In many markets prepaid is a new product, so there’s a bit of education required to help consumers understand the value of prepaid and its benefits, he said.

For prepaid issuers, creating and adopting a model code of conduct is important, as it helps to alleviate the negative perception of prepaid in some markets. And doing so makes the regulators and consumers more comfortable using prepaid as a payment tool. That, in turn, spurs global prepaid adoption and growth, especially in emerging markets, Sethi said.

Key business considerations include customer segmentation, consumer education, the development of a compelling value proposition for targeted customer segments, and the cost to develop and run a prepaid program, Sethi said.

Indeed, the cost of running a prepaid program is a particularly important consideration in that it’s mostly scale-driven and mass-market oriented. (jump to: 10:00) “Prepaid programs in emerging markets are typically margin businesses, and it is important for issuers to know any of their cost drivers, which will help the business make money,” he said.

For some prepaid issuers launching in new markets, Sethi noted, typical considerations for a successful prepaid program include identifying which market segments the program is targeting: The corporate market? Young consumers? The unbanked? Overseas workers?

Issuers also should identify the value proposition and revenue sources for that market segment, and then determine how the services should be priced. They then should identify the best way to reach a target market segment, Sethi said.

Once those tasks are accomplished, issuers should identify the most cost-effective way to serve the particular target segment, and determine which customers in that segment would like to be served, Sethi said.

To learn more about how the payments industry is responding to retailer data breaches and rising consumer concerns about security, listen to the full podcast by clicking here.

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Latest Insights: 

Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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