Mercator Advisory Group's Seventh Annual Closed-Loop Prepaid Market Assessment

Boston, MA --The Closed-Loop prepaid market grew by 7% in 2009, totaling $205.39 billion in dollars loaded onto cards. This market now accounts for more than 62% of all prepaid purchases, while the Open-Loop market, had loads totaling only $124.6 billion in 2009, accounting for 38% of prepaid purchases.

Digital Content, Government and Telecommunications are the three market categories most responsible for driving the increase in Closed-Loop market share , with growth rates of 16%, 19% and 10% respectively. The Digital Content category was driven to a large extent by the Digital Media segment that includes Apple Inc. and other music and video prepaid products. The Government segment was driven by government assistance programs that saw a significant increase in aid disbursement due to a bad economy leading to regrettable fact that more people now meet the assistance program guidelines.

Note, however, that as Mercator Advisory Group predicted, not all Closed-Loop segments saw growth. For instance, dollars loaded onto Closed-Loop cards used for consumer incentives fell 8% from 2008 levels and the Closed-Loop Gift Card market segment continued its slow growth at 3%.

"Mercator Advisory Group has once again found that prepaid is the best payments market to be in during a recession," Tim Sloane, Vice President of Client Services and Director of Mercator Advisory Group's Prepaid Advisory Service and author of the report comments. "Growth continues across most segments of the market and likely will continue whichever way the economy goes."

Mercator has identified the solutions that are poised to kick-start the Closed-Loop gift card market back into high growth mode. While virtual cards and mobile wallets have only just started to penetrate the market Mercator Advisory Group is confident that properly implemented these technologies will enable Closed Loop Gift Cards to compete aggressively with Open Loop cards.

"While virtual cards and mobile wallets are a novelty today, these technologies will be instrumental in driving growth for the closed loop gift market over the next ten years," Sloane says. "Although the impact of these technologies will first be felt in the B2B incentives market where it enables personalized messages combined with instant availability, the technology will ultimately be instrumental in integrating Prepaid Closed Loop programs to consumer loyalty programs."

Highlights of the Report Include:

The total load for all 26 prepaid segments in 2009 (Open & Closed) was $330.03 billion, a $60.74 billion increase over the $269.29 billion load in 2008 an increase of 23%.

There were $205.39 billion loaded onto Closed-Loop prepaid cards in 2009, an increase of 7% over the 2008 load of $191.78.

Closed-Loop Gift Cards used for Consumer Incentives fell by 8% in 2009, to $4.41 billion, a dramatic decline from 2008's increase of 19%.

The Digital Content Category had another great year growing to $9.29 billion, for a growth of 16%. Of this Digital Media, driven by Apple and other music prepaid products, accounted for $5.55 billion, for an 18% growth rate, despite a poor 2009 holiday season.

The Gift Card market segment only grew by $2.14 billion, an increase of 3%.

Government nutrition programs had rapid load growth of 19%, to $45.87 billion, driven by a bad economy and more people meeting assistance program guidelines.

One of 13 exhibits in this report.


This report is 27 pages and is accompanied by 13 exhibits.

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About Mercator Advisory Group 

Mercator Advisory Group is the leading, independent research and advisory services firm exclusively focused on the payments and banking industries. We deliver pragmatic and timely research and advice designed to help our clients uncover the most lucrative opportunities to maximize revenue growth and contain costs. Our clients range from the world's largest payment issuers, acquirers, processors, merchants and associations to leading technology providers and investors.