The prepaid bank card market - Brazil

1.1 Definition and scope of study

The card market is divided into four categories: credit cards, debit cards, business cards and prepaid cards. Prepaid cards "allow you to have a limited amount of money", are therefore rechargeable and do not require a connection to a current (bank) account. The increased security and functionality of prepaid cards are variables that have played a decisive role in their popularity.

A prepaid credit card looks like a regular debit or credit card (with card number, expiry date and security code, etc.). The main difference is that instead of having your own bank lend the funds to the customer, you will already have an amount of funds associated with your bank account (or a line of credit that you have already approved) and only need to choose the limit of your preference. The main advantages are convenience, flexibility, but above all total control over what you spend.

There are two types of card :

• Single use prepaid credit cards : allow a single top-up and can be used until the total balance is exhausted
• Rechargeable cards : allow other charges when the first charge is exhausted, regardless of the amount

Within these two typologies, there are still 4 subtypes of cards, whose purposes are more specific :

• Gift Cards : These are single-use cards
• Prepaid travel cards : With the aim of better controlling travel expenses
• Prepaid Youth Cards : With the objective of giving greater autonomy to young people, allowing a convenient, safe and controlled use of expenses
• Virtual Cards : Are specifically used for online shopping

In 2018, the number of prepaid card transactions in Brazil more than tripled, reaching 81 million. In the last three years, prepaid card sales grew by 40%. This increase was mainly driven by bank customers who did not have a bank account until recently and prefer to use prepaid cards before using a debit or credit card. According to the Brazilian Association of Credit Card and Service Companies (Abecs), the number of transactions and amounts moved with prepaid cards will continue to accelerate in the coming years, as the simplicity of these cards overcomes the barriers of inclusion and financial education. These cards are most commonly used in supermarkets (37%), followed by clothing/department stores (25%) and restaurants (10%).