Navigating Change....
The PELORUS Group
Market Research and Consulting Services

FOR IMMEDIATE RELEASE

Date: June 19, 2003

Contact:  Greggory S. Blundell

Phone: 908-707-1121

Email: gblundell@pelorus-group.com

PELORUS “STORED VALUE” REPORT:
PREPAID DEBIT CARD USAGE TO SOAR

Raritan, NJ - Stored value cards are changing the way people in the U.S. do business.  Stored value cards impact how we spend cash, wield checks, and most importantly, employ traditional credit cards.  The prepaid industry, which for the last 15 years focused primarily on telecom services, is about to explode into every sector of the economy.  Stored value cards represent substantial revenue opportunities for new players, but they could also significantly reduce the revenues of banks and major credit card companies, such as Visa and MasterCard.  Either way, the prepaid market is poised for change, and that change promises to be dramatic and irreversible.

According to a new report from The PELORUS Group entitled "Stored Value: 21st Century Currency", approximately 50 million adults in the U.S. don’t possess credit cards.  Almost 10 million households do not boast bank accounts.  Without access to these financial facilities, millions of people have missed out on the benefits of the transactions revolution. Now, stored value cards, aka prepaid debit cards, will enable these disenfranchised to share the rewards of E-commerce.  And the resulting revenue opportunity for players is staggering.

While the concept of stored value has been around for some time, the implementation of stored value in the form of a prepaid debit card is a much more recent development -- especially in the form of a mag-stripe card rather than a smart card.  Most of the programs to use prepaid debit cards for retail, payroll and insurance claims applications were unveiled less than two years ago. 

The opportunity for stored value extends well beyond the credit challenged who, for whatever reason, do not have a credit card or a bank account.  Among people in the U.S. with credit cards, more than 40 percent, or in excess of 50 million, own a credit card that is within 5 percent of its credit limit.  In other words, the credit provided to the user to cover transactions in any given month has been exhausted.  These cards are in effect working like debit cards, since users have to pay down the credit balance on the card, which is about the same as loading money on a debit card, if they wish to use the card for additional purchases.  Tom Miezejeski, Vice President of Research for The PELORUS Group adds, “Due to this situation, a possibility exists for a major shift from credit to debit cards.  The potential intensifies when one takes into account the recent settlement by Visa and MasterCard with regard to processing debit card transactions, which could encourage retailers to promote debit cards at the expense of credit cards, thereby actually eroding the number of credit cards issued annually.”

 The PELORUS Group projects that the number of prepaid debit cards issued annually will surge from 6.2 million in 2002, to almost 40 million in 2007.