2.3 billion prepaid card transactions in Europe by 2010

AtMArket: Europeans are expected to spend €75 billion using prepaid cards by 2010, representing 2.3 billion transactions per annum — an increase of 110% per annum over the next five years.

The European prepaid card market is set to explode in the next five years:– A total of 2.3 billion prepaid card transactions per annum anticipated by 2010,

representing 5% of total card transaction volumes and 3% of total card spending.– €75 billion spend expected across 360 million prepaid cards. This represents

substantial growth on the 40 million cards and 150 million prepaid transactions

anticipated in 2006.

– Forecasts are that annual growth rates of the prepaid card market will exceed 110% for the next five years, and prepaid gifting products (card replacement for gift vouchers) will fuel a significant proportion (almost 30%) of total spend. Other segments that will drive growth include:

• Travel products, designed to offer an alternative to traveler’s checks and foreign cash, will account for 15% of spending.

• Internet payment cards, which provide a secure alternative to credit cards, are expected to generate 13% of spending. • Company rewards and incentives programs are set to account for 12% of spending.

Despite the anticipated rate of growth, banks must act quickly if they are to secure their share of the prepaid opportunity and compete with non-banks. We have forecast that 58% of spend will occur on Visa or MasterCard branded cards but, to date, banks and financial institutions have been adopting a ‘wait and see’

strategy. The 1.9 million prepaid cards issued by Poste Italiane in Italy illustrates how nonbanks are already exploiting this opportunity.

One product does not fit all – forecast of uneven uptake of prepaid products across Europe

Significant differences are expected between European national markets as the prepaid opportunity expands. Although some 20% of the total annual European spend on prepaid cards will be generated in Germany, Austria and Switzerland, spend per prepaid card in this region is forecast at €240, compared to €340 in the U.K., €398 in France and €410 in Scandinavia. Similarly, the take-up of cards varies — from 655 cards per 1,000 people in Germany, Austria and Switzerland, to 691 in the U.K., 693 in France and 650 in Scandinavia.

These differences reflect the wide range of check and card usage that characterizes European payments in general — the Danish, for example, use their cards 12 times a month, compared to the Germans, who use their cards 1.5 times per month.

The European prepaid card Publ 20060830