According to PayNXT360, the prepaid card market is expected to record a CAGR of 8.9%, from 2018-2022, to reach US$ 29,818.1 million in terms of transaction value by 2022. During the review period, the transaction value increased from US$ 10,406.5 million in 2013 to US$ 18,828.4 million in 2017, posting CAGR of 16.0%. In 2017, the market registered a growth rate of 13.6%, and is expected to grow at 12.4% in 2018.
Prepaid card industry has recorded strong growth in recent years in Canada across all three consumer segments – corporate, retail, and government. There is significant increase in prepaid cards provided by shoppers. Prepaid gift and incentive cards are also becoming popular in Canada. In one of the key emerging trends, mid-tier businesses have recorded strong growth in rolling out consumer incentive cards, to generate sales and build brands.
Also, we could see a considerable market shift from one-time use cards to reloadable cards in Canada over the forecast period. Open-loop gift cards continued to gain market share in 2018, recording strong growth. This trend is expected to continue over the forecast period. Increased awareness about benefits of using prepaid cards, safety from burglary and online frauds and easy to use mechanism are the key reasons for this growth.
Consumers have embraced the global trend of online banking and digital payments which has paved a way for neo-banking systems to anchor their presence in Canada. Canadians and especially migrants who do not have conventional bank accounts can avail facilities such as ATM withdrawals, online shopping and paying bills through mobile based or physical prepaid cards.
However, there is growing concern around anonymous prepaid cards being used for money laundering. Consequently, Financial Consumer Agency of Canada has made amendments in the rules of issuance of prepaid cards. According to the new set of rules under federal Prepaid Payment Products Regulations consumers will have to provide key information related to prepaid cards.
The steps were taken after The Financial Action Task Force’s (FATF) 2016 Mutual Evaluation Report found that unused-lost-stolen prepaid cards could have been used for money laundering and funding terror activities. These steps are considered to fill in high-risk gaps from Canada’s Anti-Money Laundering/Terrorist Financing (AML/TF) regime and will help in regulating new business models and technologies.
In Canada, growth of e-commerce business and high growth in low value transactions at point of sales (PoS) are increasing number of transactions for prepaid cards. Canadian payment industry is modernizing and continued expansion of prepaid card market in domestic market is inviting more business ventures to prepaid card and other online payment system markets. Payments are moved by technology than conventional instruments such as currency or cheques. Mobile app based virtual prepaid cards have recorded strong growth in recent quarters.
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