In an increasingly digital landscape, consumers are relying on branded payments to control their budgets, support their loved ones and manage their privacy online. Günther Vogelpoel, CEO of Recharge.com, takes a look at some of the key pillars of this sector and why they’re gaining traction.
Branded payments have become a substantial category within the alternative payment methods space. They form a large financial infrastructure that caters to the financial needs of billions of consumers around the world. Chances are you’ve probably used a form of branded payment at some point in your life, either for yourself or someone else — you’ll recognise them in the likes of gift cards, mobile call credit or prepaid payment cards.
Branded payments is a fast-growing $3+ trillion industry, rapidly disrupted by digital. This shift is driven by smartphone penetration, the fact that traditional players are still predominantly offline, and the rise of e-wallets and other alternative payment methods — all turbo-charged by COVID-19, and further propelled by the growing need for privacy and demand for digital cross-border transactions.
A key mechanic of a branded payment is that it’s prepaid — paid for in advance and limited to a specific amount allocated. As the world adopts digital automation, branded payments offer a more flexible way to engage in a service; beyond gifting and support, people are shifting to branded payments to control their budgets and manage their privacy online.
The growing global concern for privacy, further heightened by the data scandals of recent years, has led to an increase in privacy invasion and a decline in consumer trust. As 60+ jurisdictions worldwide have enacted or proposed privacy and data protection laws in recent years, the average consumer is more aware than ever of the private information they supply and what this means for their data.
Many digital platforms require customer information that simply isn’t necessary to provide the purchased experience or product; the amount of data requested is often not logical or in the best interest of the consumer. A branded payment can allow a customer to avoid supplying their personal information across multiple services, using a gift or payment card as a financial source at all touchpoints and allowing them the flexibility to use anonymous data for their accounts and shield sensitive information including their name, date of birth or billing address.
Online transactions require valid payment methods, but branded payments mean customers don’t need to provide their regular credit card credentials to make bona fide financial transactions, leaving no trace and minimal potential for fraud. Anonymous purchasing doesn’t mean a consumer has something criminal to hide — everyone should be afforded the freedom to pay for goods as they want to, without sacrificing personal information or risking data leaks.
Branded payments offer a safe and contactless way to spend in the COVID-19 pandemic. Users can control the balance stored on a prepaid card or the amount budgeted for their monthly mobile expenses and don’t have to worry about spending more money than they’ve allocated, making them ideal for budget control — including for families, who can use branded payments as an alternative to pocket money, allowing young children to enter a world of money in a simple, safe and secure way.
Since prepaid payment cards don’t require a connected bank account the way a debit or credit card does, they’re also a key support option for the billions of people around the world who remain un- or underbanked without access to regular financial means.
The current surge in subscriptions — for everything from movies and wine to clothes and deodorants — sees consumers automating payments for multiple brands and services they use, growing their credit card bill every month. Branded payments allow customers a pay-as-you-go way to spend on the services they want while reducing the risk of automated payments exceeding their budgets.
A world of opportunities
As alternative payment methods evolve, we get closer to a world where money is more fluid than ever. Branded payments make up 15% of all alternative payment methods and this number continues to grow, offering a plethora of ways for consumers to control their budgets and privacy.
A gift card is no longer just a gift card — branded payments, in their many forms, cater to the various needs of customers of all demographics around the globe, and open up a world of opportunities for customers to spend their hard-earned money on their terms — and they’re not going anywhere anytime soon.