As options for prepaid card delivery grow,issuers, processors, and program managers should keep a level headwhen planning for the future of their card programs. Mobilewallets, virtual cards, and smartphones are all buzz phrases thathave led some to predict that we will soon see the plastic prepaidcard (and particularly the gift card) disappear. However, reportsof plastic’s coming demise are greatly overstated.
Looking at the lessons of history, it is clear that technologyleads to great changes in business, but the buggy whip is not theexample to be applied here. It might make sense to look at threebusinesses more closely related to gift and prepaid cards: media,banking, and retail itself.
Media is the first type of business that should be considered. Herewe have seen massive technological changes, with each one bringingnew capabilities that weren’t available in previous forms. Radiobrought features that newspapers couldn’t provide, and televisionbrought features radio couldn’t provide, and the Internet continuesto change the way everyone gets information. However, televisiondid not kill the radio and newspapers, and while the jury is stillout on whether the Internet will lead to convergence, so far theold forms are still around. That said, the cautionary note is thattelevision was more than just a fad.
In looking at banking in the late 1990s and early 2000s, when theInternet was rising and banks were enabling online transactions,the death of the branch was said to be due any day. Yet as Internetbanking became more widespread, so did bank branches. The branchbuilding boom was so explosive that several suburbs around Chicago,and some neighborhoods within the city, put zoning restrictions onthe number of bank branches they would allow. Even so, onlinebanking is now considered a banking product that is almost asfundamental to a product line as checking and savingsaccounts.
Along with the death of the branch, there were some who even wentas far as to predict the death of brick and mortar retail. Theargument was that everyone would want the convenience of shoppingonline, being able to pick exactly what they want, and have itshipped directly to them. Who would want to battle with crowds inparking lots and stores when the whole world could be purchased anddelivered with a click of a button? Stores have not disappeared,however, and customers still like to look at things in person andbrowse store racks. Also, retailers discovered that not everythingwas easily sold online. But despite the desire for a tangibleshopping experience, every major retailer now has an online storealong with all of its real world stores. Even the company that hasdone so much to push the world towards virtual shopping, AppleInc., began building its own stores 10 years ago, and has notstopped adding stores since.
What these examples show us is that new technologies do not alwayscompletely displace old ones. Instead, they complement them andbecome a necessary component of a 21st century strategy. Gift cardswill follow the same route. There will always be a place forplastic, but day will soon arrive where virtual cards and mobilecards will be a necessary part of every issuer’s prepaid strategy.The task for issuers is to figure out what needs each form factorfills and tailor their program to make each work towards the bestresults.