There’s a multi-billion dollar prepaid market opportunity right under your nose, where transaction volume is on the rise and adoption is soaring. Canada, eh? The Canadian prepaid market is growing rapidly, driven by consumer and business demand for new ways to pay and get paid, and a burgeoning fintech community that is bringing innovative new payment solutions to market. With an estimated CAD 4.9 billion in open-loop prepaid transactions in 2015, Canadians are choosing prepaid more often than ever for travel, business expenses, check replacement and every-day spending.
In line with this growth, Peoples Trust, the leading federally chartered prepaid card issuer in Canada, has seen significant growth in 2015 with the addition of 150 new programs, and a nearly 19% increase in dollar volume from 2014. Peoples specialises in helping card program managers establish, launch and grow card programs across Canada based on our license with global payment schemes, through BIN sponsorship, regulatory expertise, and market guidance.
For European companies looking to expand their addressable market, Canada represents a significant prepaid opportunity. Here are the top three reasons why European program managers should to look to Canada for their next growth market.
The growth
Canada is one of the fastest growing prepaid markets in the world, thanks in part to a rise in the millennial workforce and fintech hubs like Vancouver and Toronto, which are at the forefront of payments innovation. With new use cases and emerging entrants, prepaid card transaction volume is growing at a rapid rate. Between 2011 and 2014, total prepaid transaction volume surged by 30%, with the open-loop market alone expected to increase by an additional USD 9.4 billion (a CAGR of 18%) from 2015 to 2020.
Canadian consumers, both banked and un(der)banked, are turning to prepaid at a surprising rate, quickly solidifying the country’s prepaid market as one of the fastest growing in the world. Payroll, travel (foreign currency), expense management, insurance payouts, rebates, health care, money share, gaming and cheque replacement are some examples of the applications that are hitting the market today.
The regulations and security
Canadian prepaid payment laws and regulations are different from those in the European countries. Canada has its own set of government bodies, network rules and payment product regulations that must be adhered to. The country also has two official languages, which understandably creates federal and provincial nuances program that managers must be accountable for.
This may all seem daunting, however, the good news is the regulatory prepaid environment in Canada is more stable now than ever. Why?
In 2014, the Canadian government released the long-awaited guidelines governing prepaid and, hence, putting in place the first full federal regulatory structure. These requirements are expected to be the standard for the foreseeable future, which means prepaid payment service providers (‘program managers’) can focus on business instead of compliance, rather than worrying about potential changes that could impact the market.
Leveraging the expertise of established Canadian partners will help European program managers navigate the regulatory system and have a solid understanding of how to implement a program so that it is fully compliant in English and en Français.
Canada was an early adopter of the EMV (‘Chip and PIN’) credit and debit cards, with prepaid adoption quick on its heels. With newer prepaid technologies such as Dual Interface, consumers can now benefit from the look and feel of a traditional credit card product, while still providing the added security and convenience of personalized embossing, Chip and PIN and contactless processing.
The Canadian dollar
Let’s face it, the Canadian dollar has dropped 18% in the past two years and doesn’t look to be making a rise anytime soon. While this isn’t making Canadians too happy, Canada is now a great opportunity for European program managers based on economics. European companies can expand to Canada with less friction and more cost-efficiency, due to the value of the dollar and common language and cultural considerations.
Canada’s prepaid network offers a lineup of strong, connected, and qualified prepaid and payments players that can support prepaid program managers’ needs, including Peoples Trust Company (leading prepaid issuer), Canadian Prepaid Providers Organization (CPPO), Canadian Payments Association (CPA), MasterCard Canada and Visa Canada.
When done right, Canada is the most favorable prepaid market for European program managers looking to expand. It is essential for program managers to choose partners who provide comprehensive issuing services, regulatory expertise and market guidance to help establish, launch and grow successful card programs. With the right partners, program managers can avoid the pitfalls of entering a new geographic market and remove many barriers to entry—getting to market faster and more cost-effectively.
About John Pals
John Pals is COO of Peoples Card Services, a subsidiary of Peoples Trust Company. He is a seasoned executive with over 25 years of experience in financial services in North America, Europe, Middle-East and Asia-Pacific and held senior positions in product development, operations and marketing from start-ups to multinationals across multiple industries. His core strength lies in innovation and product development in heavily regulated industries.
About Peoples Trust Company
Peoples Trust is a federally chartered financial institution that has been providing financial services to Canadians for over 30 years. For more than a decade, Peoples has been providing comprehensive issuing services for prepaid and credit cards. Their regulatory expertise and market guidance have helped card program managers from around the world establish, launch and grow card programs in Canada.
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