Research indicates that the global economic downturn is weighing heavily on the growth of the card markets (credit and debit) worldwide, while fuelling a demand for prepaid cards. The players in the prepaid industry segment (FIS included) however, discover some unique challenges in growing the business. Here are some of my thoughts.

The most important challenge among them is legal and regulatory requirements, which is followed by market infrastructure and readiness. Influencing policy when the world staggers under the burden of a somewhat failed system is a tough proposition; converting a marketplace full of skeptical consumers is another challenge. Education, evangelizing, and marketing remain the top three priorities for prepaid marketers. The rest of the things-to-do like product design and selection, business models, and strategies can be managed within individual boardrooms.

“Going after prepaid opportunities in the international market requires more than just an understanding of the macro-economies and regulatory environments in each market,” comments Terry Xie, Director, International Payments Advisory Service, Mercator Advisory Group. Legal, regulatory, and cultural differences in international markets are significant and therefore, a prepaid product has to be very region-specific. Another factor to keep in mind is out-of-the-box thinking. This is crucial as the prepaid business is a non-traditional market for the banks. Innovations in providing prepaid solutions to identify and serve unmet financial needs bring lots of potential.

The value chains of the prepaid card industry in different markets tend to be complicated and demand careful considerations in the designing of a prepaid business model. For example, in India no retailer can on its own have a prepaid card without partnering with a bank as its bin provider. This, apart from the network provider (Visa or MasterCard), plus a third party infrastructure support provider, stretches the value chain quite a bit. Thus, getting different parties involved and building a business ecosystem requires creative thinking and a willingness to cooperate.

In-depth understanding of the market opportunities and consumer behavior is critical. Take the case of two new prepaid cards that were launched in the UK recently. One, 'Cash Manager' for adults looking to budget in tough times and the other, ‘Load & Go,' aimed at teens that are not just looking for a safer alternative to cash but also want to shop online, but can do so by borrowing their parents' cards. A reloadable card (linked to their parents' accounts) for teenagers, age 13 and up seems such a great idea. With this card, parents teach children money management, nay, manage their own better. Children get to buy only things that are 'allowed,' since, the cards are programmed to deny, e.g., a purchase at an adult Internet site or liquor store. Parents can pack off their children with this new card to boarding schools, summer camps, and the like without a worry about watching their spending. In fact, they will be able to see it all the time, every time the card is used, from the SMS they will receive. How? The company that launched them, O2, is the UK’s leading mobile company.