Improving The Accuracy of Prepaid Market Size Estimates


Boston, MA, April 2, 2008 - In its recent report "The Electronic Payments Study - A Survey of Electronic Payments for the 2007 Federal Reserve Payments Study" released March 2008, the Federal Reserve Board highlighted the fact that "Separating out the hyperbole from documented results has proven to be a far greater challenge than anticipated. The reluctance by industry participants to share data suggests that there are some concerns about releasing information publicly."

While the Federal Reserve Board (FRB) quoted Mercator Advisory Group estimates it regrettably failed to consult with us regarding the methodology used to derive our data. This methodology is well documented and available to all Mercator Advisory Group members and we would have been delighted to share that methodology with the FRB since Mercator Advisory Group believes its methodology will improve the FRB research.

Mercator Advisory Group proposes that the industry more clearly and publicly define the different segments that are being measured to make it easier to compare data collected from multiple research sources.

For example the FRB research effort identified just 13 prepaid market segments, the same number that Mercator Advisory Group used in its first Annual Prepaid Benchmark back in 2003. In 2004, Mercator Advisory Group research expanded to measure 33 market segments. While the FRB did not clearly define the 13 segments that it included in its research, a rapid review by Mercator Advisory Group suggests that the FRB has likely failed to count, or deliberately excluded, the following closed loop segments that Mercator Advisory Group has included in its US-based research since 2004. These closed loop market segments represent $94.75 billion dollars of spend that the FRB failed to count.

Business Travel

$40 Million

Events & Meetings

$160 Million

Employee/Partner Incentives

$7.13 Billion

Consumer Incentives

$3.17 Billion


$13.71 Billion

Digital Media

$2.73 Billion

Games & Ringtones

$2.42 Billion

Store Gift Cards IN Distribution

$3.68 Billion

Food Stamps

$37.2 Billion


$2.1 Billion


$1.89 Billion


$1.1 Billion

Prepaid Mobile

$15.85 Billion

Prepaid Long Distance

$3.45 Billion

Prepaid Internet Dial Up

$120 Million

Once market segments are well defined, the next obvious area of improvement would be a list of key players participating within each segment. While the FRB report does not identify the organizations it requested data from, it is clear to Mercator Advisory Group that the FRB underestimates the number of organizations active in the prepaid market and overestimates the market share of the organizations it surveyed. For example, many of the Top 100 retailers that have significant closed loop gift card programs self-process these transactions. If the FRB research only surveyed processors it will have missed a very significant portion of the closed loop gift card market. Mercator Advisory Group suggests that this list of key participants within each market segment be made visible.

Tim Sloane, The Director of the Mercator Advisory Group Prepaid Practice Area said"Mercator Advisory Group will make itself available to the FRB and to the Prepaid Industry to help establish an open and visible methodology for measuring the state of the prepaid industry at a level of detail that enables direct comparison of the research efforts. We urge merchant associations, open loop industry associations, and individual market participants to provide assistance in establishing a consistent methodology for measuring this industry and establish a trusted repository for the collected data. Ready access to aggregate data, protecting the individual source and market share statistics of individual participants, will serve the Prepaid Industry well. The wireless telephony industry established a similar research methodology almost 10 years ago and has found that the release of this data improves industry relations with both regulators and consumer groups."