Payment Methods

Can Prepaid Travel Cards Save Loyalty Card Programs?

From frequent flier miles to co-branded card rewards, airlines look to offer a range of products and services that can help improve their customer engagement.

Unfortunately, these offerings don’t always work as strongly as expected.

In fact, there are roughly 23.8 trillion airline miles that go unredeemed globally, which The Economist valued at approximately $238 billion. According to Skift, about 80 percent of U.S. airline loyalty program members are actually inactive.

It’s clear something isn’t clicking.

Scott Salmon, general manager of international at i2c, recently joined PYMNTS to share how airlines can not only improve their loyalty card programs, but actually do a better job of engaging customers through the offering of prepaid travel cards.

When it comes to prepaid, the travel sector is one of the most significant (and quickly growing) sectors worldwide because of the value proposition that prepaid travel cards offer.

The Win-Win-Win Scenario

Prepaid travel cards can bring benefits to cardholders, issuers and really any stakeholders in the program. Salmon said it’s because prepaid travel cards are able to provide meaningful value that is hard for other payment cards to replicate.

First and foremost, they are multi currency. This means that multiple currency purses can be used on a single card, which is a huge benefit for travelers. Prepaid travel cardholders are also able to lock in exchange rates when they feel they are favorable, as opposed to being exposed to those exchange rates when they travel.

Not only do prepaid travel cards offer control over currency exchange, but they also typically come with secondary or supplementary cards that cardholders can control and manage. Whether its setting a limit or transferring funds, these additional cards provide a backup if the primary card is lost or stolen, or they can be given to family or friends for use. Typically, features like setting a spending limit or transferring funds can be handled instantaneously from a mobile app.

Prepaid travel cards also provide a holiday savings purse, which Salmon said can be used to set aside money when funds are loaded toward an upcoming trip or excursion.

“The value propositions that you don’t necessarily see with other card offerings — that’s what’s driving the prevalence around the world,” Salmon added, referring to the growing popularity and usage of prepaid travel cards.

Clearing up the Prepaid vs. Credit Misconception

One of the first questions that comes up when discussing prepaid travel cards is why an airline would offer them if they already offer a co-branded credit card.

There’s a common misperception that prepaid travel cards may displace or compete with a credit card or a co-branded card, but Salmon explained that it’s actually just the opposite.

“The truth is they actually act as a complementary offering to the program cards, acting as a companion card displacing cash,” he added. “If you talk to some of the biggest issuers of prepaid travel cards around the world, what they’ll tell you is that many of the people who get the prepaid travel cards are actually the best credit card customers.”

Prepaid travel cards are used for different purposes compared to a credit card, making them a nice add-on or complement. Many of the standard features on a prepaid travel card are not as easy to replicate on a co-branded card, including multi-currency purses, the ability to customize services on the card via a mobile app, supplementary cards, holiday savings purses and money transfer services.

The cards also have the benefit of interactive digital experiences, which enable cardholders to receive relevant alerts and offers based on their travels and the relationship they’ve built with the airline issuer.

Because co-branded credit cards typically reach only a small portion of an airline’s customer base, Salmon noted, prepaid travel cards provide an issuer with the opportunity to reach more customers.

“With a prepaid card, everyone qualifies; so what you see is that airlines are looking at prepaid travel cards as a very effective way to provide a payment card across their entire customer base,” he explained.

The prepaid travel card offers a new and different way for airlines to build customer engagement, cross-sell other services and differentiate from their competition, as well as take advantage of a new revenue source.

According to Salmon, prepaid travel cards are by far the most profitable prepaid globally, which has helped to drive the growing trend of airlines taking on the offering. With more airline involvement, prepaid travel cards have also seen more growth worldwide.

“One of the success criteria for prepaid is getting to the right person at the right time with the right product, and who’s better suited to do that than airlines?” Salmon said.

Airlines have also started to integrate their prepaid travel card programs with frequent flier membership cards, creating a multifunction card that acts as both their membership card along with a prepaid travel card. This type of integrated loyalty and payment product is the future of next-generation travel programs.

What’s Next for Prepaid Travel Cards?

Salmon expects the growth and usage of prepaid travel cards to only increase going forward, especially with expanding value propositions and industry involvement.

He said there will be continued innovation in the form of new and different types of services related to prepaid travel, as well as more engagement models from issuers that improve the linkage of offers and promotions with the prepaid cards.

There is also an expectation that airlines globally will become more actively engaged in issuing prepaid travel cards.

“We are uniquely positioned to help airlines and other prepaid travel card issuers with multi-currency travel card solutions and agile processing platforms,” Salmon noted.

He said that the flexibility of i2c’s processing platform enables its customers to pick and choose the right building blocks to deliver on those value propositions. This allows them to assemble unique, customized solutions for their customer base.

“That’s a very powerful tool combined with the reliability and stability of our platform, which has a zero downtime record for more than three years,” he added. “It’s a very compelling proposition to have the control and the flexibility to provide that type of value to customers.”

Scott Salmon, General Manager, International

Scott has over 25 years of experience in strategic planning, product development and product management for some of the world’s leading financial services companies. Prior to i2c, he was Head of Prepaid Products, Asia Pacific, Central Europe, Middle East and Africa at Visa, where he spent 20 years of his career in various strategy and product roles. Before Visa, Mr. Salmon was engaged in a variety of consulting and product management roles in the retail banking sector. As i2c’s General Manager, International, Scott is responsible for developing i2c’s business in key global markets.

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