Adoption of prepaid cards has been increasing steadily in Australia. While the general purpose prepaid card has witnessed strong growth in the unbanked / underbanked segment, travel forex and gift card segments have recorded increased adoption in recent quarters. As the prepaid cards are associated with MasterCard, Visa and American Express these are increasingly being used for online purchases and for international travel. For international travel, prepaid cards are available with single or multicurrency options. For example UnionPay offers Australia Post Load&Go China Card for Australians traveling to China.
Prepaid card market is fragmented in Australia and therefore there is no dominant player. Competition is high with many prepaid card options. However, share of prepaid still remains low in the payment industry in Australia, representing huge growth potential. Small transactions at grocery shops, cabs and other transports is another area where there is significant growth potential for prepaid cards. The existing players are enticing customers by offering reward points, discounts on transaction fees, availing expanded limitations on ATM withdrawals. The prepaid card market is expected to record a CAGR of 12.6%, from 2018-2022, to reach US$ 28.4 billion in terms of transaction value by 2022.
Prepaid markets in Australia are targeting millennials who expect a speedy, transparent and real-time banking experience. Neobanking, digital banking and Fintech with borderless banking are some of the upcoming trends in Australia. Though there are enough players in the market, in 2018 two neobanks entered Australian prepaid card market – Xinja from Australian and Revolut from the UK.
Xinja a banking startup that envisions becoming first 100 percent digital neobank of Australia has launched a prepaid travel and everyday spending card in March 2018. It is a tap and go card and the app is available on IoS and Android. Xinja aims to use prepaid cards to offer digital banking experience and other products such as home loan.
London based Revolut has launched its prepaid card in Australia under its global expansion plan. The multicurrency prepaid card can be used locally as well as for international travel. It aims to provide low cost global spending with the rate the banks use to buy and sell currency themselves, and also allows free international ATM withdrawals up to £200 after which a 2% fee applies.
Melbourne based Fintech Pelikin released a travel card in September 2018 aiming young Australians who are frequent international travelers. The prepaid card aims to enhance cross border travel experience and allows users to hold up to five different currencies at once and spend in over 200 countries.
American Express launched its new American Express Go service in Australia in November 2018. This digital credit card will be used by Australian businesses to manage the business expenses of temporary workers, contractors and other employees. It comes with various benefits such as tracking expenses, reload or cancel the balances online and allow use of card at various contactless options.
Initiatives across prepaid travel cards look growing and it will be used as an entry strategy of newly establishing banks to showcase their performance and entice banking experience to young Australians. International banking institutions will use prepaid cards to expand their banking in Australian markets.
Overall PayNXT360 expects more players from international markets to enter Australia with unique prepaid card offers. The new prepaid cards will have integration with mobile apps making cards more agile, virtual and this will increase use of prepaid cards at micro level and in smaller transactions. This is something that will attract millennials towards mobile banking and eventually will increase use of prepaid cards for micro-financing and sale of other banking products.
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