Ajay Sethi, an expert on payments innovation, comments on how retailers can add value to the customer via prepaid cards and what the future has in store for the sector

Ajay Sethi, an expert on payments innovation, comments on how retailers can add value to the customer via prepaid cards and what the future has in store for the sector

Prepaid cards are an area of the retail sector that has remained buoyant, despite the tough economic climate, and they offer valuable new business opportunities for retailers if they keep up with developments, according to Ajay Sethi, client relationship manager at PrePay Solutions, a UK prepaid technology firm.

The UK’s gift card and voucher market is currently in good health, having experienced its highest ever year-on-year increase in sales according to the latest statistics from The UK Gift Card & Voucher Association (UKGCVA). Overall, the market has seen a growth of 15.6% in gift card and voucher sales in the first quarter (Q1) of 2011 compared with the same period in 2010. This bucks the trend of decline across the wider retail sector where growth in retail sales has been the lowest in 16 years, according to the British Retail Consortium.

Capitalising on multichannel growth

Sethi stressed that professionals in the retail sector should be aware of how they can best use prepaid cards in order to capitalise on this growing market. The challenge for retailers will be keeping pace with what is a rapidly changing market. The prepaid sector is driven by innovation and in particular there is a current shift towards mobile vouchers.

“Mobile vouchers allow retailers to reach out directly to the customer via their mobile,” explained Sethi. “A person’s mobile is connected to their world, both personally and professionally, and the use of mobile vouchers allows retailers to target customers on the move, wherever they are. What’s more, the recipient is likely to always have their handset with them, unlike a paper voucher, which may be left at home or misplaced. Retailers can provide added value to the customer by offering extras such as discounts, special offers and details of related events to encourage further spend. Personalising vouchers for the individual user, making them more relevant and engaging, can also increase redemption rates.

“Another key factor which helps to increase uptake of mobile vouchers is convenience,” he continued. “With mobile vouchers payments, the consumer benefits from a faster process, with payment handled quickly. In fact, within a few minutes and several touches of their phone screen, they are able to complete a transaction using their portable device. This convenience also makes it easier for the recipient to use the voucher and then send on to others to enjoy as well. In Future Foundation Research from 2010, 40% of consumers stated that they ‘often pass on High Street discount vouchers to friends and family’. Therefore, with nearly half of recipients spreading the word of a brand via a voucher, this is an area that retailers cannot ignore. This makes mobile vouchers a very effective way for a retailer or brand to encourage trial of a store or product by new customers.”

PrePay Solutions, which works with retailers to create and manage mobile vouchers, launched a promotional voucher solution with a major High Street retailer in the run up to Christmas last year. The invitation to register for a promotional voucher was sent out to customers across the UK via email and through affiliate websites. Once they registered their details, customers received a unique single use virtual voucher via email or SMS, to be used to receive £5 off in store.

“Recipients were encouraged to pass on details of the promotion to friends and family, thereby increasing the audience reach for the retailer,” Sethi explained. “PrePay Solutions managed the redemption process, and enabled the retailer to track and monitor the performance of its promotion, giving it valuable data on redemption. This insight into customers, their spend and behaviour is extremely useful for retailers and also works to evaluate the success of a voucher.”

Smart exploitation of existing channels

“An important aspect to consider in the use of mobile vouchers in retail is that they represent a way to reach and communicate with the consumer via the existing channels that they are using,” stated Sethi. “Mobile voucher payments are growing in response to the increased use of smartphones. In the UK alone it is estimated that 11 million people currently own this type of phone, a figure that is set to increase as mobiles continue to develop and evolve.

“Smartphone users in this country are now spending £581m a year by making purchases on their mobile phone through apps, according to mobile marketing specialists The BIO Agency, with one in five smartphone users in the UK purchasing items.”

PrePay Solutions recently partnered with a retailer and their iPhone app developer to launch a loyalty-based iPhone App featuring a unique Virtual Loyalty Card – the first of its kind for a UK high street retailer. Customers can use the App as a virtual card to collect and redeem points as well as check their balance and transactional history.

“However, one key area that retailers will need to address is that of customer perception,” Sethi admitted. “Many people are still reticent to spend via their mobile due to privacy concerns. The security issues are the same as for online and credit card payments, and the industry is collectively working on solutions to address this and working with retailers to help them address these issues with their customers.

“We are already seeing the results of this with 68%* of consumers claiming to trust retailer websites with their personal details and payment information when buying goods or services online. If relinquishing personal data is seen to equate with enriched value and service, then it seems highly likely that the consumer will consider this an acceptable exchange.

“The prepaid card market is as buoyant as ever with mobile vouchers anticipated to really lead the way in the coming years,” he concluded. “There are many ways in which retailers can work with the prepaid sector to reach consumers and drive sales.”

* According to research by the Future Foundation