Globally, grocery retailers are launching prepaid cards to overcome losses and expand market share

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Globally, the prepaid card industry is expected to post strong growth in 2022. The market is being shaped up by specialist fintech companies and startups, targeting niche areas and exploiting underserved segments. However, now retailers, particularly grocery retailers, are crowding the space eyeing the strong growth potential of the prepaid card market with new and innovative launches. For instance,

• In January 2022, British grocery and general merchandise retailer Tesco introduced a prepaid debit card through its banking subsidiary, Tesco Bank. The prepaid card will be linked to a savings account called Round Up, it does not have an overdraft facility or direct debits, or any fee charges as in the main bank account. Particularly, only the customers having any of the company’s Clubcard will be able to access this prepaid card.

Together with the Visa-powered prepaid debit card, customers get a payment account called Clubcard Pay+ and also a savings account, Round Up. Each has its own functionalities; customers have the privilege of adding money to their Clubcard Pay+ account from any bank account in the United Kingdom through the Tesco Banking app, allowing the customers to manage their grocery spending. While the Round Up account helps the customers save by rounding up their purchases to the nearest pound, the difference gets added up to this account.

Most importantly, the RoundUp account pays a variable of 0.25% interest, incentivizing the shopper to shop more. Therefore, this innovative payment method will help the customer budget and save and will help the company expand its market share over the next four to eight quarters.

• Similarly, in February 2022, German grocery giant ALDI, is giving away free gift cards as well as gift bags for the customers visiting the opening of its first Lafayette, Louisiana store. Apart from this, the discount grocery chain is also conducting a contest for the customers to win a US$500 ALDI gift card.

Many grocery stores do not serve the Lafayette area; therefore, the discounts offered by the company will attract many customers together with the gift card giveaway strategy.

Prepaid cards have been launched over the years to meet the payment needs of various customer segments/industry processes such as gifting, payroll processing, government benefit disbursement, consumer transit, travel expenditure etc. Notably, this has emerged as a meaningful way for retailers to manage competition and strengthen their customer acquisition strategy. Retailers gain psychological benefits through various types of prepaid cards, as customers perceive these tools as money-saving options, and customers’ inclination towards retailers grows in line with the benefits these tools offer. 

Moreover, the restricted movement across the globe to fight against the pandemic is largely affecting the profitability of retailers. The pandemic is also affecting the global economy, which makes consumers more concerned about their spending. Consequently, retailers are focusing on various strategies to increase sales and retain more customers through prepaid cards.

To know more and gain a deeper understanding of the global prepaid card market, click here.