Prepaid Cards – What Are the Uses and How Do They Work?

A prepaid card can be defined as an easy alternative to banking cards. Users can use the amount up to the limit stacked on the card and utilize the same for making purchases. Prepaid cards are generally used in low-value transactions like micropayments in shops, cafeterias, vending machines, etc. The basic features of prepaid cards are that they have reloading option, ATM access, and a limited amount that is to be used.

In case of closed-loop cards, the funds are stored in the token or else in the form of binary-codes. The value of the payment cards can be obtained by using a magnetic strip, radio-frequency identification (RFID), telephone number, or any other type of numeric data. Low risk of frauds, easy accessibility, and low-interest charges are the driving factors that have fuelled the global prepaid cards market. Prepaid cards usually carry the logo of the respective card brand or network that processes the transactions. Visa, MasterCard, American Express are some of the examples that can be cited in this regard.

However, before using the cards one should know, if they’re right for them, and how do they actually work. One can get hold of a prepaid card from a credit card company or purchase it from a store that accepts the practice. A person holding a prepaid card is required to load it with a certain amount of money and then can use until it is valid. Prepaid cards work as that of a savings account like, the amount is deducted from the balance available in the card. These cards are reloadable, which means one can add money to it again and again. If someone wants to have a prepaid card, then it is not really mandatory to have a bank account or a credit check. Gift cards are the ideal type of prepaid cards as they give receiver the freedom to redeem them and buy what they want using the same.

Recently, it’s been in the news that that Transcorp International Ltd. has received RBI signals for initiating Application Programming Interface (API) based co-branding partnerships. The company has also been allowed to launch prepaid payment instruments (PPIs).It can be used in over 35 lakh stores and online gateways. One can load the cash top-up of 1 lakh rupees. This facility is for those, who have undergone the Know-Your-Customer (KYC) process.

According to Allied Market Research, the global Prepaid Card Market is expected to register a significant CAGR from 2020 to 2027. Developments in the e-commerce industry and increase in adoption of prepaid cards due to the advantage of adding funds through multiple channels have supplemented the growth of the market. North America is the key contributor to the global market.

In a nutshell, prepaid cards can be defined as a hassle-free way of dealing with the cash needed for respective purchases.To have a share in the pie, prepaid card providers should continue to innovate their services focusing on the customer’s viewpoint.

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