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Prepaid Market Assessment: France
Global Prepaid Exchange, May 2011, Pages: 57
Prepaid is an emerging market with many application areas, roles and companies whose operational areas and borders between them are not always clean cut. It is not unusual for a company to offer a range of products and services spanning multiple areas of the value configuration. Compared to credit and debit cards, prepaid is a niche industry – which is fragmented into a number of sub-niches.
France represents one of the largest potential prepaid markets in Europe. The major prepaid opportunities are Corporate Incentives and Benefits, Government Disbursements, Transportation, and Consumer Gifting. The French Corporate Incentives and Benefits category is one of the largest prepaid opportunities in Europe and constitutes 44.2% of the French opportunity.
Four players dominate this market: Sodexo, Edenred, Chèque Déjeuner and NatixisIntertitres. The competition is fierce – and it is difficult for new players to gain a foothold and claim a significant share of the market. In the transportation sector, the Navigo scheme in the Paris metropolitan area operated by RATP surpassed EUR 1 billion annual load value in 2008, making the transportation company a significant prepaid player. Consumer gift vouchers and plastic cards are sold by many leading retailers. Consumer gift vouchers and plastic cards are sold by many leading retailers and A3C reports of sales to the B2C market in 2009 was EUR 604 million and for B2B the figure was EUR 1,521 million; out of this total of EUR 2,125 million, closed loop constituted EUR 750 million and filtered/open loop EUR 1,375 million.
A handful of banks have attempted to launch open loop gift cards, but the sales volumes have been marginal. Lately, there has also been a spur of growth in the number of General Purpose Reloadable (GPR) card brands on the market, although the product category is still in an early phase of the life cycle. Payroll card potential is limited by the fact that banks are required by law to open a bank account to any employed person, and bank transfers are the dominant method for paying out salaries. There is a niche market, however, for payroll cards for temporary workers, provided by companies such as Adecco.
Reimbursement and FX & Travel cards have yet to be introduced in France. Prepaid is often an alternative to existing legacy solutions and existing business relationships. It can require new infrastructure, the changing of legacy systems, and the education of buyers and recipients. Some applications face not only competition from other prepaid companies, but also from strong substitutes and existing value configurations. Certain prepaid applications face competition from other payment instruments as well, including debit cards, credit cards and cash. In addition to consumers, corporations and government institutions must also be educated and convinced of the prepaid value proposition.
Up until the turn of the millennium, paper was the dominant prepaid format in Europe; then plastic cards began to claim market share. Since 2005, there has been a major shift in formats used with increased speed in the move from paper vouchers to plastic cards. In 2010, it is estimated that approximately 55% of prepaid in Europe takes place on plastic cards. Along with the increased adoption of plastic cards, since 2005 the concept of virtual prepaid solutions has slowly started to gain traction. Virtual prepaid encompasses a range of technologies used to identify and redeem value, including NFC and barcodes/2D barcodes, which can be distributed through SMS, e-mail or other channels. While all these technologies are available in France, paper remains the dominant format for prepaid as of 2011. This is mainly due to the fact that corporate incentives and benefits exis primarily on paper. There have been few incentives to convert paper vouchers to plastic cards. Fraud on meal vouchers is manageable, vouchers do not require small restaurants to invest in payment terminals to accept them, and recipients are familiar with the paper format. Further, the revised e-money directive's potential implication on breakage could nullify any arguments in favor of moving these products to plastic cards.
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