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Study: Revisiting the Prepaid Financial Services Value Chain

August 7, 2013

The prepaid value chain has evolved in response to regulatory changes and market volatility. However, with no one "right way" to maximize its utility, differing models have emerged, with some prepaid providers preferring minimal integration or consolidation of the prepaid value chain and others preferring to incorporate as many aspects of the value chain as they can.

Since 2005, Mercator Advisory Group has studied the prepaid value chain and monitored its steady progress.

In a new report, "Revisiting the Prepaid Financial Services Value Chain," the research firm explores the advantages and disadvantages of both minimum and maximum value chain integration.

The report also reviews recent regulatory changes that have had a significant impact on the prepaid value chain. 

"As prepaid has evolved over the years, so has its value chain," said Tristan Hugo-Webb, an analyst at Mercator and the primary author of the report. "From the traditional compartmentalized value chain to an almost completely consolidated value chain, the level of integration ranges broadly by firm.

"Some prepaid card operators like AccountNow fall toward to the low end of the spectrum of consolidation with relatively few changes to the original value chain. On the opposite end of the spectrum, American Express and its Bluebird prepaid card represent one of the most consolidated value chains in the prepaid segment as American Express controls many aspects of its prepaid card program," said Hugo-Webb.

Highlights of the report include:

• an in-depth examination of the prepaid value chain;
• insight into the spectrum of integration of the prepaid value chain;
• comparisons of different value chains or models used by leaders in the prepaid market; and
• review and analysis of recent regulatory changes and their impact on the prepaid value chain.

One of 11 exhibits in "Revisiting the Prepaid Financial Services Value Chain."

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