It didn’t take long for prepaid debit cards to go from niche product to mainstream. But soon they might be obsolete.
Some of the country’s largest companies are developing mobile wallet applications, which allow customers to use smartphones and other devices to pay for products. The rapidly evolving technology has yet to catch on with many consumers, but some believe the mobile wallet phenomenon could get really big, really soon.
“In five to 10 years, we’ll all be using our phone to pay, not plastic,” said Gil Luria, an analyst with downtown L.A.’s Wedbush Securities Inc. who follows a number of prepaid card issuers. “I think it’s the future for all of payments.”
With that concept in mind, many prepaid card companies are working to stay relevant by preparing for their own mobile applications.
Earlier this year, Monrovia’s Green Dot Corp., the nation’s largest issuer of prepaid debit cards, bought a Silicon Valley tech company that holds a number of mobile technology patents. Another local payment company, Westwood’s WikiLoan Inc., which recently rolled out a prepaid debit card product, this year merged with WikiPay, a micropayment company that has a mobile wallet application.
The opportunity is enormous: Mobile payments accounted for about $105 billion in global spending last year, according to Stamford, Conn., research firm Gartner Inc. By 2016, mobile spending could surpass $600 billion.
Google Inc., Wal-Mart Stores Inc. and PayPal Inc. are among the major corporations placing big bets on the nascent technology. Google Wallet, which allows users to pay for purchases with the swipe of an Android phone, is already accepted at more than 300,000 retail locations.
Steve Streit, chief executive of Green Dot, said there are plenty of opportunities for smaller companies to develop mobile wallet technology, including partnering with some of the larger players. It might also be possible to compete against them, he noted, because Google Wallet and other applications still only have a limited number of users.
Regardless, he said prepaid companies have to be prepared for a postplastic world.
“Anything you do had better be compatible with mobile (technology),” he said. “The mobile banking space is something we have absolutely put a lot of effort into.”
Some startups are bypassing cards completely.
Two new companies – Paperlinks in West Hollywood, and Kuapay LLC in Santa Monica – have recently introduced mobile payment systems – and neither bothered with plastic cards.
Straight to digital
For reprint and licensing requests for this article, CLICK HERE.