October 2008
Boston, MA

5th Annual Prepaid Closed-loop Market Assessment

This report is the second of three reports that provides a thorough analysis of the growth and ongoing development of the Prepaid Industry. It documents the spending, growth, and market dynamics for the 23 prepaid segments that directly participate in the closed-loop market. This report provides an overview of spending in each category and delivers details on the dollars loaded in each segment, the growth over the last five years, and the market dynamics that impact each segment. This report is unique in that it clearly defines all 33 segments that make up the total prepaid market and then documents the spend and growth of all 23 closed-loop segments. It delivers a historical perspective on these markets using data that goes back to 2003 - providing the industries only independent and consistent data set measuring the growth and dynamics of the prepaid industry for five years.

Highlights of the report include:

• This report finds that $179.6 Billion was loaded on Closed-loop prepaid solutions in 2007, an increase of 4.92% over the 2006 load of $171.8 Billion. The total load for all 33 Prepaid Segments in 2007 (Open & Closed) was $218.3 Billion, $20.4 Billion more than in 2006, an increase of 10.3%.
• Closed-loop Gift Cards used for Consumer Incentives grew by 26.4%.
• The Digital Content Category had another great year growing to $6.65 Billion for a growth of 28.5%. Of this Digital Media, driven by Apple and other music prepaid products, accounted for $3.8 Billion for a 39.4% growth rate.
• The In Store Gift Card market segment grew by $4.26 Billion.
• The Distributed Gift Card market segment grew by 36.4% from $3.67 Billion to $5 Billion.
• The Petroleum Industry grew by almost 25% on card placement in their own stores to achieve load value of $1.37 Billion.
• The Telecommunications Category has slowed down to a growth rate of just 6.7%. Leading this slow growth was the Mobile Minutes segment that slowed from 22% last year to less than 7% this year.
• Long Distance prepaid continued to slow down moving from 6.95% in 2006 to 5.95% in 2007 to reach $3.66 Billion.

Tim Sloane, Director of Debit and Prepaid Services for Mercator Advisory Group and the author of this report indicated that the Closed-loop prepaid industry continues to have significant headroom for additional growth, but is also confronting major challenges from Network Branded solutions in some markets:

"This year is the first time in the five year history of this research that the closed-loop employee and partner segment saw negative growth while at the same time the Open Loop contribution to that segment grew at greater than 80%. In Store Gift Cards saw a slower growth in 2007 although this slowdown was uneven, having a greater impact on large merchants that have operated gift card programs for several years rather than merchants that launched their gift card programs more recently. The other side of this equating is that the older In-Store Gift Card programs have gained an established position in the Prepaid Mall market that is growing 36.5% thus limiting access to this critical distribution channel to new gift card entrants. This report also studies the success of the Prepaid Mall Distributors and the leading role they have taken as reload channels for Open Loop cards and are now focused on creating a range of financial services for the unbanked and underserved."

One of the 16 Exhibits included in this report.

The report is 37 pages long and contains 16 exhibits

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