Not on the money

[Dave Birch] I’m always keen to try out innovative new payment products. And I’m an O2 Premium Customer, or whatever it’s called. So when I was idling around in London yesterday and happened past an O2 outlet offering the new “O2 Money” prepaid card, I thought I’d pop in a get one. Since it’s a prepaid card, I assumed it would be a bit like getting one at the newsagent or supermarket. I wandered in, expecting to hand over £50 and walk out with a card with £50 on it. But it turns out that despite the big advertising poster in the shop window, the doesn’t actually sell them. The guy told me I had to go home and apply on the interweb. Oh well. One night I was bored enough at home to try and do this, so I went to the O2 Money web site. I thought I’d get a card for my son to use. The web site asks you to put the mobile number in and sends you a code. I did this, and got the code. I typed it in expecting to see a screen saying “congratulations” but instead I got another form asking me to top up the phone using one of my other cards. Naturally I couldn’t be bothered to do this, so I still don’t have a card and nor does my son.

Since O2 already know my address, phone number and bank account details, and have a decade-long credit history on me, Wouldn’t it have been cheaper and simpler to have a “text ‘yes’ to XXXXX and we’ll post you a card” option? Why no integration?

Irrespective of my whining, I think O2 Money has had a pretty successful launch. There is a big advertising campaign, which appears to be working, and plenty of cards are going out the door. Is the UK about to accelerate its prepaid market to the point where prepaid Visa cards and MasterCards are mass market products? Is the UK about to look more like the US?

In the United States, open loop (bank issued) pre-paid cards have experienced only moderate success.

[From National ACH: Pre-Paid Cards Boom or Bust ?]

Not sure I’d qualify them as a moderate success, since they are a big business, but to get to the point where everyone has one will still take some breakthrough.

Mercator estimates users loaded $187.2 billion onto closed-loop cards last year, up 4.3% from 2007’s estimated load of $179.6 billion. But open-loop or network-branded prepaid cards offered by banks and payment processors are coming on strong. Mercator pegs their 2008 load value at $60.4 billion, up 48.5% from 2007’s estimated $40.7 billion.

[From News]

But perhaps the mobile phone is, once again, the special sauce. The idea of prepaid cards in phones, or prepaid stickers on phones, has plenty of momentum.

mobile payments will gain momentum with prepaid – even without penetration of NFC terminals to support it.

[From Mobile Payments at the Point of Sale [ATM, Debit & Prepaid Forum 2009] — Payments Views from Glenbrook Partners]

See. But there’s another point here, though, I think. Our experience, gained from a number of projects that involve both prepaid cards and mobile phone is that the combination of prepaid card and phone (in the O2 sense) is powerful even without technical integration between the two as in NFC. Provided that the cardholder can see the balance of the card on their phone, then they will use the card more. Simply knowing the balance (and the mobile phone is by far the easiest way to achieve this) is enough to boost card use: there’s no immediate need for any really fancy functions.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]