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Understanding Prepaid Card Systems

Prepaid cards function like gift cards in that funds are loaded onto the card prior to making purchases. There are three main types of prepaid cards: closed system cards can only be used at a single merchant; semi-closed system cards can be used at multiple merchants within an area; and open system cards can be used anywhere that accepts cards with the same brand logo (e.g. Visa, MasterCard). Open system prepaid cards are marketed as prepaid debit cards since they allow spending of preloaded funds without offering any credit.

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Ankit K
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25 views2 pages

Understanding Prepaid Card Systems

Prepaid cards function like gift cards in that funds are loaded onto the card prior to making purchases. There are three main types of prepaid cards: closed system cards can only be used at a single merchant; semi-closed system cards can be used at multiple merchants within an area; and open system cards can be used anywhere that accepts cards with the same brand logo (e.g. Visa, MasterCard). Open system prepaid cards are marketed as prepaid debit cards since they allow spending of preloaded funds without offering any credit.

Uploaded by

Ankit K
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd

In the course of presentations we have come across credit cards,white label cards and debit cards..

Today we will understand what prepaid cards are and its functionalities A prepaid credit card works in the opposite way of a normal credit card, because instead of buying something with borrowed funds (through credit), you buy things with funds that have already been paid. This card functions like a gift card. Closed system prepaid cards Closed system prepaid cards have emerged and replaced the traditional paper gift certificate, and are commonly known as merchant gift cards or store cards. "Closed system" means the cards are only accepted at a single merchant. Purchasers buy a card for a fixed amount and can only use the card at the merchant that issues the card. When a cardholder redeems all but an insignificant portion of the card on merchandise, that amount is generally lost and is absorbed by the issuer. Semi-closed system prepaid cards Semi-closed system prepaid cards are similar to closed system prepaid cards. However, cardholders are permitted to redeem the cards at multiple merchants within a geographic area. These types of cards are issued by a third party, rather than the retailer who accepts the card. Examples include university cards and mall gift cards. Cardholders generally suffer from the same redress ability problems that closed system card holders suffer from.

Open system prepaid cards Open system prepaid cards or network branded prepaid cards are not credit cards,No credit is offered by the card issuer and the cardholder spends money which has been prepaid to a card. Therefore, these cards are marketed as "prepaid debit cards". The value is not physically stored on the card instead, the card number uniquely identifies a record in a central database, where the balance is recorded. These cards are similar to closed system prepaid cards, but are endorsed by a retail electronic payments network such as Visa, Visa Electron, MasterCard, or Maestro and can, unlike gift cards, be used anywhere debit cards with the same logo may be used. The money on the card can be redeemed for goods only, and is not redeemable for cash.

Before we go on to see how prepaid cards have grown in india, Lets see how they are fairing over the world

USA was the country where they originated with a belief of Positioning GPR products as checking/debit alternative Targeting both unbanked and under banked Prepaid Cards have grown popularity in SA with retailers coming up with no processing fee Due to their simple eligiblity criteria Nigerian Banks have come up and supported the move Key banks like Kenya .have started offering prepaid cards Expected CAGR for 2012-2016 Coming to latin america, The current growth was Last to the middle east.. WPS Wages Protection System works on Prepaid system where once the organisation disbusses the salary the bank in cordination to WPS credits the cards of workers

Jebel ali the mall works on prepaid card

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