According to a report by Giesecke & Devrient, the use of pre-paid payment cards is quickly increasing in India. There are around 17 million pre-paid payment cards currently in use, compared to 316 million credit and debit cards, but the gap is steadily decreasing.
There are many people in India who do not have an active bank account. A large drive launched in the early 2000’s sought to bring most of its population under the formal banking system, but today around 90% of the 100 million accounts opened under the plan are unused. Almost 50% of India’s 1.2 billion population still don’t have bank accounts today.
It is thought that this is a driving factor for the increase in pre-paid card transactions, which are not linked to bank accounts. One of the advantages of a pre-paid card is the reduced possibility of fraud and subsequent damage. Unlike cards linked to bank accounts, which could see bank accounts emptied in cases of fraud, the pre-paid cards have a specified limit and consequently the losses incurred, if any, are minimal.
With the security and the enhanced control that prepaid cards offer, the increasing familiarity of their use by the public and people becoming more accustomed to managing their spending, it is expected that India will see a continued rise in the use of pre-paid payment cards.
Source: Live Mint, Wall Street Journal