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The Promise of Prepaid in India

EMV JapanPrepaid cards have evolved over the years to become quite popular now, whether it’s a gift card for a friend or forex while on an overseas trip. For the uninitiated, here’s a look at the advantages of the prepaid card.

Wide range of benefits

First, the obvious: it scores over cash. For unbanked recipients, cash exposes them to potential loss via theft or corruption. Cash is difficult to travel with too, especially on foreign trips. It is worth noting that you don’t need a bank account to buy a prepaid card.

Second, prepaid cards are gaining acceptance, at more points of sale around the world, thus offering several benefits to travellers. Prepaid forex cards allow cardholders to access cash worldwide via ATM withdrawals. Rates are locked in at the time of card purchase, an excellent add-on as travellers are able to avoid forex fluctuations.

For those country-hopping, there are multi-currency prepaid cards. Such cards let you load cash in a number of foreign currencies, and allow you clear control over foreign currency spending. Moreover, these cards are not linked to any bank or credit card account, and offer a more secure alternative to carrying cash or traveller cheques, as cardholders are protected against loss or theft with zero liability protection.

Third, for gifting purposes, prepaid cards are a good fit. They can be redeemed easily, are widely accepted, are a great alternative to gift vouchers that tie recipients to a particular store and limit choices.

Fourth, prepaid cards are great for college students as well, most of whom are newcomers to the world of banking.

Such cards allow parents to cap expenses, while providing college-goers with easy and secure ways to manage their finances. These young spenders learn the nuances of budgeting and financial planning without the harsh lessons of spending too much too quickly. Prepaid cards also meet the cross-border payment needs for students headed abroad for studies.

Limits enhanced

With the growing demand for prepaid cards, the RBI has allowed prepaid debit card owners to issue multiple cards to his/her dependents and family members, while also enhancing the limit on prepaid payment instruments to ₹1 lakh, up from the current limit of ₹50,000. Moreover, with the RBI recently enhancing the maximum validity of gift cards from one year to three years, they now enjoy longer validity.

Prepaid cards could also be an entry point to financial inclusion. They can help bring more Indians into the financial system, as well as benefit merchants.

The next evolution in prepaid cards will include multi-currency cards tied to loyalty programmes with airlines, hotels, and others.

This article first appeared in Hindu Business Line on 23 February 2015.