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Report: Prepaid cards catching on with Canadian FIs

In a nation where the population is largely banked, it's taken the prepaid industry considerable time to cultivate a market for its products, a new study says.

September 17, 2014

Major Canadian banking institutions have begun to enter the general purpose reloadable prepaid card market, a move that bodes well for longer-term growth, according to "Prepaid and Gift Cards in Canada," a recent report by market research publisher Packaged Facts.

The move opens up growth avenues beyond the narrow band of unbanked and underbanked consumers who have been the primary targets for these cards in Canada, the report finds. For instance, travel prepaid cards open doors to international use, while cards such as TD Bank's TD Go Card target banked families.

Canada's focus on financial inclusion leaves less room for products such as prepaid cards. Banking account ownership is nearly universal, debit cards are prevalent, and low-cost bank accounts are offered by the country's major banking institutions.

"Because Canada is so highly banked, expanding the target audience of general purpose reloadable prepaid cards beyond underserved consumers is key to growth, a strategy some of these newer cards are clearly intended to actualize," Packaged Facts Research Director David Sprinkle said.

On the down side, the report also anticipates that it's only a matter of time before prepaid card interchange rates garner more scrutiny, as they generate fees far above those generated by the country's Interac debit card platform. Still, the report forecasts robust growth for these cards in the near term.