[Dave Birch] I’ve been in Milan for a client, running a workshop for bankers, which gave me a chance to catch up on the Italian payments world. One of the ways in which it is interestingly different from the UK market is the rapid growth of prepaid cards here. The Post Office (Poste Italiane) has three-quarters of the market with its Postepay card which is based on the Visa Electron platform. It has more than 2 million cards in circulation already and 20,000 new ones are issued each week. Why is prepaid so successful here?

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The Postepay card only costs €5 and can be recharged at any post office location or ATM. It’s part of the reason that one management consultancy (Roland Berger) ranked Poste Italiane as the most innovative Italian financial services company in 2005. I think in most countries the idea of the Post Office winning the most innovative award for anything would seem far-fetched, but they’ve made it work here. There’s even a co-branded version bundled with the Microsoft X-Box that kids use to pay for online games and other goodies: how cool.

Apparently it can be difficult to get a bank account or a credit card so for people without regular employment (eg, students, pensioners, kids) this prepaid card is a pretty useful alternative. Parents give their teenagers prepaid cards, younger kids use their cards to buy and sell on eBay or download games and music. Naturally, the cards are also very popular with immigrants, perhaps some form of remittance business is coming next.

From talking to a couple of the folks here, it seems to me that distribution has to be one of the keys. Poste Italiane has 14,000 locations, while the country’s largest retail bank only about 3,000 branches. This translates into a widely-available product that is easy to “maintain”. There are other organisations that could play at this game: Tesco, or one of the other major chains in the UK, probably has enough shops (as well as the online presence) to do something fun.

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