The Prepaid Card in India

Introduction

The first prepaid card in India was introduced in 2001 and since then the market is continuously increasing. An article published in The Times of India on June 19, 2022, reported that contactless payments had increased from 2.5% in December 2018 to 16% in December 2021. According to the report, cards have a 26% impact on digital transactions. 

Prepaid cards have proved to be one of the most cost-effective and effortless provisions to save money from an individual to large-scale corporate. These are the perfect replacement to bear a huge amount of money in the pocket; a stored-value card contains a fixed sum of money that has already been stored by its user. It is not likely operated by a bank account but with a direct “payment account”.

Why choose pre-loaded cards?

Helps manage expenses- Segregating a specific quantity of monthly expenses in advance from the total monthly funds can help in saving money for households and even small businesses.

Remote product- Evidently it is an easier way to move a certain amount instead of carrying a bulk of cash in a pocket.

Keep records- It is a product that helps its end-user to supervise their daily expenditure.

For everyone- One can divide the expenses as per company needs and issue cards to everyone with constant monitoring of expenditure.

Security- A safe means to hold money because of the instant blocking services in case of any theft or loss.

  What does the Indian market offer?

The market of prepaid cards in India offers its customers to select wisely with the help of different sections in which the cards can be identified.

Type of cards.

• Open-loop- These types of cards work as debit cards for the reason that they provide amenities like online banking, and payment provider logos (such as MasterCard or Visa) sanctioned by banks or card companies.

These facilities allow customers to purchase from any retailer or store anywhere around the globe.

• Closed-loop- Unlike open-loop cards, these are used for one specific store or can be considered one-time-use cards. In addition, they do not acquire any network logo on them.

Classification according to the services provided.

• GPR (General Purpose Reloadable): These replenishable cards are mostly used by people with no access to debit or credit cards and are accepted everywhere from retailers to bill payments.
• Prepaid gift cards: As the name suggests, it is best suited as a present to someone dear. If it is a non-reloadable one its durability is short in comparison to the ones with bank facilities and is usable to limited retailers otherwise it can be recharged as per the user’s interest.
• Health saving account card: This is a rechargeable card that helps its user to pay medical bills whenever needed. Mainly, it is run by employers, who can load it with medical expenses for their employees to use when needed.
• Prepaid travel card: This reloadable card is befitted for foreign travelers because these are globally admissible. They are unaffected by the change in exchange rates and hence can be loaded before leaving the country.
• Transit prepaid card: It is a refill card issued by the transportation system of the city for the comfortable transportation of the citizens.
• Governments benefit cards: Operated by the government to pay for government benefits schemes such as child support, unemployment, etc. It can be reloadable and non-reloadable as well according to the benefit plans provided by the government.

Services for institutions and retailers.

• Prepaid cash back cards: Everyone likes a little return of their spent money every now and then; this card offers a little percentage of returns on the expenditure of its cardholder but for limited retailers.
• Retails prepaid cards: It comes to work when certain merchandise collaborates with the card network. One can enjoy the perks of merchandise discounts, reward points, and additional services through this card.
• Payroll prepaid cards: A replenishable one that is helpful for the employees without provisions of bank accounts so that their employers can pay their wages by recharging the card.

Remarks on the recent market situation

In the latest update on June 20, 2022 RBI has prohibited NBFCs (Nonbank finance companies) to load PPI (Prepaid payment instrument) through credit lines.  As per RBI, fintech companies have misused the freedom of BNPL (Buy Now Pay Later), and customers are overusing the services and drowning in a pool of debt.

To make these debts come to an end RBI barred companies from giving small ticket fintech loans which will stop the digital wallet and stored-value cards that are using credit techniques for merchandising.

Even with these restrictions, cards can still be filled with a certain quantity before being used. Users are free to use their pre-loaded cards for payments and transactions. For any cardholder who wishes to acquire a pre-loaded card, BankIT is able to provide its services according to the user's needs.