The principle of the prepaid card is simple: transfer cash onto a card to be used until the balance drops to zero. In some countries use of such cards has been common practice for around ten years now. This payment method has known notable success in Japan, Canada and the US.
These rechargeable cards are anonymous and may be used to make purchases on the Internet without inputting one’s credit card number. Recharging is simple and may be done at a newsagents. In return for a cash payment one receives a ticket corresponding to the desired sum of money. The number on the ticket is then transmitted via text message (or Internet) to a computer server, which charges the prepaid card. The card may then be used in the same manner as a credit card to make purchases or withdraw cash at ATMs. They are marketed under brands including Transcash PCS, Neocash, Tonéo or Ultreia, and affiliated with the international networks of MasterCard or Visa.
With no links to any bank account, the card user does not run any risks with respect to hacking when making online purchases. An additional benefit is that it is impossible to go into the red. This form of payment is therefore particularly suitable for those wishing to impose self-discipline upon themselves. The assurance of anonymity also allows the user to shop discreetly. But this feature is open to misuse. In the eyes of anti-money laundering authorities the product represents easy pickings for those wishing to avoid detection. Prepaid payment cards are often used by scammers, in particular in order to transfer funds to overseas accounts.
Technological innovations to keep the prepaid devices in fashion
The prepaid payment system is not immune to technological innovations, the prepaid bracelet for example. For a few years now PayinTech has been developing a private payment solution for music festivals and sporting events. When a customer arrives at the event location he credits his bracelet with a chosen sum of money. Subsequently he may use the bracelet when he wishes to buy a drink. All the while the customer’s wallet remains securely in the cloakroom. This bracelet is a mix between prepaid payment and NFC technology. As is often the case with NFC, the payment takes only a couple of seconds, allowing for quicker passage at the bar.
The on-demand series giant Netflix is also riding the wave of prepaid payments. In order to gain subscribers amongst those who do not have bank accounts, or are reluctant to enter their bank details, Netflix offers three prepaid cards at values of 15, 25 or 50 Euros.
This payment system therefore has many advantages: it is independent of the banking system, cannot be run into overdraft, and offers anonymity. But as we have seen, the latter can be turned into a negative point as it attracts traffickers. This does not seem to be preventing upcoming new technology companies from launching themselves on the market.