Payments modernization and innovation are often in the news in Canada but not with a positive take. Mired in delays for new payments infrastructure, regulatory complexities and limited competitions and market concentration Canada is not broadly seen as an example of innovation for payments and digital banking services. One bright spot has been open loop prepaid, with an appeal to businesses, consumers and governments, open-loop prepaid solutions have filled the gaps by acting as a critical platform for driving innovation, offering a flexible, efficient and secure foundation for digital payment growth.
Prepaid technology, functioning as a versatile platform, empowers businesses with an efficient and cost-effective means to introduce, expand, and fine-tune an array of innovative payment products and services. By capitalizing on the existing infrastructure provided by global giants like Visa and Mastercard, companies can sidestep the complex and time-consuming process of developing their payment networks from scratch. This not only accelerates the time-to-market but also significantly reduces the financial overhead associated with infrastructure development.
The beauty of prepaid technology lies in its adaptability to a diverse range of use cases. Whether it’s launching branded gift cards, facilitating corporate expense management, offering loyalty and rewards programs, or even distributing humanitarian aid, the prepaid platform’s modularity allows for customization to meet specific business objectives. This flexibility translates to a seamless integration of new offerings into consumers’ daily lives and has fueled the rapid growth of prepaid into a CA$12 billion industry Fintechs and banks alike are leveraging its flexible infrastructure to develop innovative digital payment solutions like budget/expense management, BNPL, digital disbursements, and instant digital issuance.
Our latest research indicates the Canadian open-loop prepaid card market will reach CA$19 billion in annual loads by 2028. Canadians are now opening prepaid accounts at a higher rate than debit or credit accounts, reflecting a growing demand for payment options that align with consumer’s evolving financial needs.
Prepaid’s Appeal for Consumers and Businesses
The innate familiarity and compatibility of prepaid solutions with existing payments infrastructure ensures a smooth user experience. Customers can easily make payments online, in-store, or via mobile apps, with the same level of security and convenience associated with conventional payment methods. This harmonious integration minimizes friction and enhances customer trust in the offered payment products.
As businesses increasingly shift their operations to online and mobile platforms, prepaid solutions align perfectly with these trends, catering to the preferences of a digitally engaged audience. The ability to manage accounts, monitor transactions, and reload funds in real time through digital interfaces adds an extra layer of convenience, further strengthening the appeal of prepaid options.
How Prepaid Supports a Robust Regulatory Framework
Prepaid cards, which can be physical plastic cards or used via digital methods on mobile devices, are issued by federally-regulated entities under the Bank Act or Trust and Loan Companies Act (as applicable). Prepaid is also governed by the Payment Card Network Rules and subject to regulation by OSFI, FinTrac and the FCAC.
Not only does prepaid maintain the same fraud and loss protection in accordance with the Zero Liability protections of the payment networks, but the funds also don’t expire and there are fee restrictions on what can be charged to cardholders. Prepaid also adheres to all applicable consumer protection, AML and privacy requirements, and solutions can be tailored to government programs, such as social assistance, tax refunds, employment insurance, pension and other program disbursements. The government can also leverage prepaid solutions to equalize disbursement access — all while accounting for fraud, authentication and tracking controls.
Prepaid’s Impact on Driving Financial Wellness
In a broader context, prepaid technology plays a pivotal role in promoting financial inclusion and wellness. By providing a tool that is accessible to a wider range of individuals, including those who may not have traditional bank accounts or credit cards, businesses can contribute to empowering underserved populations. This inclusivity fosters economic growth and stability by offering a gateway to participate in the digital economy.
Research shows that 60% of consumers are concerned about using credit cards online, preferring the safety and budgeting benefits of prepaid cards. For online purchases, 30% prefer prepaid cards for their spending limits, helping to prevent overspending.
Prepaid solutions can also be used to drive financial inclusion, providing an initial point of access to financial systems to those who are currently underserved by traditional products. There’s also the added benefit of speed. Prepaid funds can be delivered in real-time and deposited into people’s accounts in seconds. Similarly, prepaid cards can be instantly issued via digital wallets to get people access to funds faster, easier and securely.
Prepaid’s Role as an Innovation Engine for What’s Next
Prepaid continues to drive consumer-friendly competition and providing the gateway for exciting new ways to bank, transact, get paid and grow inclusive access to financial services.
A new era of growth in Canada has come from the development of instant issuance capabilities, expanding prepaid accounts into new market segments. As technology advances and consumer preferences evolve, the traditional banking model has shifted toward a predominantly digital landscape. According to the Canadian Bankers Association, only 10% of Canadians now primarily bank in-person at a branch.
The rise of BNPL providers, neobanks and challenger banks, and gig payment platforms can be largely attributed to the availability and reliability of Canadian prepaid card rails. These systems enable seamless integration and rapid deployment of financial products, which are crucial in a market where speed and adaptability are key.
By leveraging the flexibility and security of prepaid infrastructure, neobanks and challenger banks have grown significantly by offering features like instant account setup, real-time payments, cash-back rewards, credit building, budgeting tools and youth banking that appeal to consumers of all ages.
As digital-first solutions gain momentum, prepaid payments will be at the forefront of this shift, driving innovation across various sectors. With its adaptability and secure infrastructure, prepaid technology not only enhances financial convenience and inclusivity but also paves the way for businesses, consumers, and governments to navigate and thrive in an increasingly digital economy. As Canada’s payment landscape continues to evolve, the role of prepaid in fostering a more accessible and efficient financial ecosystem will become even more pivotal.
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Jennifer Tramontana, Co-founder and Executive Director of the Canadian Prepaid Providers Organization
Jennifer Tramontana is the co-founder and Executive Director of the Canadian Prepaid Providers Organization, a not-for profit organization serving the $12B prepaid payments industry in Canada. She is a sought-after partner for payments and fintech brands that are passionate about leading and disrupting digital financial services. Jennifer’s writings and commentary have been featured in The Financial Post, The Globe and Mail, CBC, American Banker and Forbes. She has worked with businesses, foundations and government agencies in the U.S., Canada, Europe, and Asia, bringing an international perspective to her work. Jennifer is also a popular speaker on fintech communications strategy, entrepreneurship and women’s leadership, sits on the Paytech Women Presidents Advisory Committee and is a Money 20/20 Rise Up Mentor.
About the Canadian Prepaid Providers Organization (CPPO):
The The Canadian Prepaid Providers Organization (CPPO) is a not-for-profit organization and the collective voice of the $12B prepaid payments industry in Canada. The CPPO gives our members the intelligence, education, access and network to tap into this innovative payments community. Our members include issuing banks, networks, fintechs, program managers, processors and service providers. Connect with CPPO on LinkedIn and X.
