Opportunities in the global prepaid card and digital wallet market

 

Digitalization, rising e-commerce activities, and a tech-savvy population are the key factors aiding the growth of the global prepaid card and digital wallet market in 2023. The trend is projected to further continue over the next five years, as PayNXT360 estimates that the market will grow at a compound annual growth rate (CAGR) of 10.3% from 2023 to 2027, increasing from US$1.5 trillion in 2022 to reach US$2.5 trillion by 2027. The data clearly indicates that there is plenty of headroom for growth in the global prepaid card and digital wallet market.

To tap into the growing demand for prepaid cards and digital wallets, fintech firms and financial service providers are launching new products, forging strategic alliances, and entering new markets in 2023. For instance,

·         Mastercard, in July 2023, announced a strategic partnership with Sombank to launch a debit card in Somalia. The goal of the strategic alliance is to promote and drive the usage of digital payments. Initially, the two firms agreed to distribute 100,000 cards in 2023. However, going forward, there are plans to expand the program in Somalia. The collaboration is also expected to drive financial inclusion in the country from the short to medium-term perspective.

In Africa, the demand for prepaid cards and digital wallets has been growing rapidly over the last few years. STICPAY, a United Kingdom-based digital payment provider, reported that e-wallet usage in African countries has increased by more than 250%. The firm has experienced a growth of 255% in forex and domestic payment transactions across African countries in H1 2023. The trend is particularly higher in some of the African nations. In Kenya, for instance, the number of digital transactions for domestic payments, forex, and gaming increased by more than 5,000%. This is the highest among all African countries. Egypt and Nigeria, on the other hand, were the fastest-growing e-wallet gaming markets in H1 2023.

The surge in the number of digital wallet transactions is a clear indication that the African market is poised for an accelerated growth trajectory over the next five years and is heading towards becoming a dominant cashless society. According to PayNXT360’s estimates, the Africa and Middle East prepaid card and digital wallet market is expected to increase from US$56.52 billion in 2022 to reach US$100.84 billion by 2027, growing at CAGR of 11.6% between 2023 to 2027.

In the Middle East, too, fintech firms are forging strategic alliances to launch innovative prepaid card products across different categories. FOO, for instance, partnered with a number of different banks to launch a prepaid travel card solution. In addition to a prepaid card, the travel card solution also offers a white-label digital wallet app. The prepaid card also facilitates the conversion of money into various currencies, enabling travelers to make seamless payments.

Read More - Cash ceding ground to digital wallets in the United Arab Emirates in 2023

With the ongoing boom in the leisure and business travel segment since the pandemic outbreak, the multi-currency prepaid card can accelerate the growth of fintech firms like FOO globally. Consequently, PayNXT360 expects more fintech firms to launch such travel prepaid card solutions from the short to medium-term perspective, catering to individual and business travelers worldwide.

In the Asia Pacific market, especially in India, similar trends are emerging wherein firms are forging strategic alliances to launch innovative prepaid card solutions. Giverly, a fintech firm focused on creating a social impact, entered into a collaboration with Transcorp International and Visa to launch a prepaid card that merges shopping with charitable giving. The prepaid card solution offers discounts and converts everyday spending into meaningful donations for the most pressing issues.

According to Giverly, the firm will be able to feed about 50,000 people and prevent 4,000 deaths, if just 10,000 users transact using the Giverly prepaid card solution. The firm also has a presence in the B2B segment, wherein it enables employers to distribute incentives and benefits directly to employees through Giverly cards.

In India, the prepaid card and digital wallet market is poised for an accelerated growth trajectory, over the next five years. PayNXT360 estimates that the market to grow at a CAGR of 29.7% from 2023 to 2027, increasing from US$35.69 billion in 2022 to reach US$134.59 billion by 2027. Prepaid card launches like Giverly, coupled with the presence of big giants like Paytm, PhonePe, and Google Pay, will keep supporting the growth trajectory in the Indian market over the next five years.

The adoption of prepaid cards and digital wallets is also expected to grow significantly in the Latin American market from the short to medium-term perspective. Growing access to the internet and smartphones is driving digital payment solution growth across the region. With more consumers expected to gain internet and smartphone access and enter the digital economy, the Latin American market presents a significant growth opportunity to domestic, regional, and global fintech and financial services firms.

Read More - WhatsApp expanding its roots in the payments market to support its social commerce ambitions

In Latin America, the prepaid card and digital wallet market is expected to grow at a CAGR of 10.7% from 2023 to 2027, increasing from US$62.96 billion in 2022 to reach US$109.38 billion by 2027, according to PayNXT360’s estimates. The data clearly indicates that there is plenty of growth opportunity available in the Latin American region for fintech and financial services firms.

Read More - FedNow to transform the digital payments market dynamics in the United States

Many nations, worldwide, have adopted a policy to drive financial inclusion and boost the digital payments industry. This is expected to lead to a more favorable regulatory environment for fintech and financial services firms, enabling them to capitalize on the growth opportunity presented in the prepaid card and digital wallet sector from the short to medium-term perspective.

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