While Covid impacted the travel and tourism industry severely, reports suggest that people are finally having open minds on taking vacations again. More than 2.2 billion people are expected to cross international borders for leisure, business, and other purposes over the next 10 years, according to World Travel and Tourism Council.
As consumer travel spends increase, it will open up a huge market for banks and card issuers to work with travel companies and improve the consumer experience. Prepaid cards are fast emerging as a preferred transaction instrument among international travelers and with growing adoption, the role of these cards has expanded from being a mere store of value to a multi-utility card with add-on functions such as loyalty, card controls, expense management and budgeting. Such adaptational transformation needs financial institutions to have the right underlying infrastructure to bring new prepaid products and services and develop their digital capabilities.
Digitally savvy customers have set the bar high in terms of their expectations for speed, convenience, and security. Juxtaposing this need for urgency is the need to conduct adequate Customer Due Diligence(CDD) and Know Your Customer (KYC) checks in line with regulated money laundering and terrorism-financing risk guidelines.
Many issuers are AI-enabling customer onboarding to balance the need for these compliance requirements with growing cardholder expectations for a quick and frictionless onboarding process. According to Mckinsey, simplifying the application process can optimise completion times by up to a third, raise fulfillment rates by a quarter, and increase digital applications by 40 percent.
Appification of Cards
With the mobile emerging as the preferred consumer medium to interact with service providers, the physical form factor is being replaced by virtual cards. Many issuers are launching mobile apps linked to a virtual card as a strategy to sustain cardholder engagement and build long-term value. The app enables customers to manage prepaid accounts, prevent card misuse and fraud and receive alerts for partner offers.
Joining this trend are Borderless app that enables customers to manage and control their multi-currency Borderless Prepaid Card account real-time anywhere, anytime using a smartphone
Loyalty programs and segmentation of specific loyalty propositions
Meaningful reward and loyalty programs can drive enhanced consumer experience and retention. Issuers must leverage cardholder data to create segment-specific propositions and forging partnerships with a range of third-party service providers to extend the scope of card usage and differentiate loyalty programs.
Personalization and added-value services include free ATM withdrawals (basis customer transaction spends)travel insurance, baggage allowance, executive club membership, access to global airport lounges, concierge services, golf access special offers and promotions to encourage repeat and higher purchases. Similarly, segment-specific loyalty propositions help issuers offer multi-functionality prepaid forex cards that act as a global student ID, discount card and payment card, offering convenience, flexibility and security. Banks has partnered with various merchants to offer exclusive deals on books, food, shopping, travel and accommodation, among other things, for students holding this card.
Build a Captive Customer Base
Issuers can provide a differentiated prepaid offering by introducing a savings purse built into the prepaid card account. Customers can set aside funds for future travel plans and earn rewards in the form of interest from the amount accumulated in the savings purse. For example, a foreign exchange company offers a Travel Savings Plan to enable travelers to steadily build up travel funds that remove exchange rate uncertainty. Prepaid forex card issuers can capitalize on this global trend and promote contactless payments while embracing initiatives that make authentication easier.
Efficient card design
The design of the prepaid card program is a top profitability lever for issuers. The crucial revenue components of the card program are Forex mark-up from arbitrage on currency, revenue from card sale, transacting fee, interchange fee, and interest on the float.
Whilst the design of a specific card program is a function of market context, overall strategy, and business capabilities, issuers need to carefully balance between revenues and cost. An ability to support a large bouquet of currencies, for example, can be a crucial market differentiator and unlock value from new segments, but it can also result in margin leakages. To design an efficient card program, issuers must ensure that they choose the right technology partner to build a scalable, flexible, and configurable prepaid card issuance and management infrastructure and meet evolving consumer needs.
Strategic partnerships with third parties provide customers with greater value-added benefits.
Views expressed in this article are the personal opinion of N. Satish, Deputy Chief Product Officer, FSS Technologies.