Fantastic plastic: are prepaid cards replacing credit cards?
Travelers are finding both financial and security advantages to using prepaid debit cards.(Metrovaartha)
Click here to add Alejandro Carbon as an alert
Disable alert for Alejandro Carbon,
Click here to add Majid Al Futtaim as an alert
Disable alert for Majid Al Futtaim,
Click here to add MasterCard as an alert
Disable alert for MasterCard,
Click here to add Promoth Manghat as an alert
Disable alert for Promoth Manghat,
Click here to add UAE Exchange as an alert
Disable alert for UAE Exchange
The payments industry is shifting these days. A growing number of people are ditching their cash, cheques and credit cards in favour of a new alternative payment tool called “prepaid debit card.”
According to industry sources, prepaid cards have become an increasingly popular payment tool among consumers in the UAE, whether for online shopping, gifting or traveling.
They serve as an alternative tool for making electronic transactions, and they work just like any other plastic money, as they are valid anywhere credit cards are accepted. The good thing is that anyone can use it, even those who don’t have a bank account.
In a survey among its 4,000 customers in UAE, Majid Al Futtaim Finance found that nearly eight in ten (78 per cent) people prefer to buy a prepaid card as a gift for their friends or family members during special occasions.
And when they do travel abroad, consumers find it more convenient to use a card loaded with cash rather than credit, because they don’t want to get socked with excessive fees and charges while overseas.
According to Promoth Manghat, CEO of UAE Exchange, more and more people, especially travelers, are opting for prepaid cards due to security and financial reasons.
Citing a recent research by MasterCard, he said that by 2017, total prepaid card usage in the Middle East is expected to reach $48 billion, of which transactions in the UAE would account for $13 billion.
Statistics released by Visa also noted that 75 per cent of all payment cards issued globally are now debit or prepaid rather than credit. Visa estimated the UAE’s prepaid sector to top $18 billion in the next five years, driven by growth in travel and tourism, increases in online spending and cashless payment initiatives.
"Security issues, budget management, spend control, exchange rate fluctuations and risk of carrying hard cash are some of the factors for the increasing shift of travelers toward using prepaid cards," noted Promoth Manghat, CEO of UAE Exchange.
The adaptability to online shopping adds to the convenience. “Prepaid card enables an individual to budget [their money] and control their spending while traveling and make online payments,” he said.
“While [credit card] accrues interest to be paid later, [debit card] might trigger indulgence exceeding the travel budget, as it is connected to a bank account balance. To own a prepaid card, one doesn’t necessarily require a bank account,” Manghat told Gulf News.
UAE Exchange has its own branded reloadable payment cards. Last year, it saw a 30 per cent growth in the number of customers using “gocash” prepaid travel card.
Manghat said prepaid is now gaining wider acceptance because it enables users to budget and control their spending while traveling, and make online purchases at the same time.
Alejandro Carbon, executive director for alternative commercial products and analytics at Majid Al Futtaim Finance, noted a similar trend. “We are seeing a strong growth in prepaid card sales and usage in the UAE as more consumers opt for convenience and security over cash,” he said.
“Prepaid cards are a convenient tool for travelers as they can replace the need to use credit and debit cards for many transactions. They also provide additional security as there is a limited balance on the card, reducing loss in case of misplacement or theft. Lastly, travelers do not need to carry cash with them if they have a prepaid card, making it a lighter and easier payment tool,” he added
When it comes to gifting with prepaid cards, Majid Al Futtaim Finance, found that 85 per cent of the respondents consider any amount greater than Dh100 to be an appropriate amount loaded in the card.
The majority (nearly 90 per cent) said they would appreciate receiving a gift card as a present. “This highlights the increasing popularity of prepaid cards as a gift option,” the company said in a statement.
There’s also a huge market waiting to be tapped into by the UAE’s card payments industry, with 76 per cent of the survey respondents saying they have traveled in the past six months and have plans to travel in the near future.
Only 17 per cent of the respondents were likely to book their next trip through a travel agent. "This indicates that there is a growing trend for utilizing online booking platforms that allow for easy and simplified experiences that fit into the customer’s overall daily lifestyle habits," said the company.
By Cleofe Maceda