By 2025, the UK prepaid card, voucher and digital wallet industry will be worth nearly $60 billion (£45 billion)—and it’s growing fast. Prepaid payments are a convenient and, at times, necessary way for people to make online and offline purchases. For people with poor credit ratings or no access to credit cards, they fill that need.
Digital transactions are becoming more mainstream, and both retail and online stores recognise the need to accept them.
In an effort to curb spending, stay out of debt and enhance privacy, people are preferring to use their own funds, rather than relying on credit. The three most popular ways to do this are with digital wallets, prepaid cards or prepaid vouchers.
Here’s a detailed look at how the latter work, their benefits, where they’re most used, their limitations and what to expect in the future.
What Is a Prepaid Voucher?
A prepaid voucher is similar to a prepaid debit card, where a set amount of money is made available to make a purchase. The difference is that the voucher typically consists of a unique code (usually 16 digits) rather than a physical or online card. Vouchers can be purchased online or from various retailers (location-specific). They’re a straightforward way to make an online purchase.
Benefits of Prepaid Vouchers
The most significant benefit of a prepaid voucher is that it doesn’t have to be linked to your personal bank account. This means that you’re not required to provide your bank details to anyone. In the age of financial services scams, this gives users peace of mind when shopping online.
The statistics may sound high, but it’s estimated that 1.1 million UK residents don’t have a bank account. For some, such as the long-term unemployed, the sick or those facing financial difficulties, it isn’t an option.
For others, in particular, the 18–24 group, it’s by choice. Some reasons they don’t have one are:
- High fees: Bank fees are perceived to be excessive, and some people feel that they’re an unnecessary expense.
- Lack of trust: Scams, high-profile news stories and a general feeling of unease are reasons why many younger people are wary of opening a bank account.
- No ID: Some people, like those who don’t have a fixed address, may not have a valid ID, which is necessary to open a bank account.
While the no bank account scenario is the most common reason for choosing to pay by prepaid voucher, there are other benefits:
- Set spending limits: Only the amount loaded to the voucher can be used. This protects from overspending.
- Widely accepted: Prepaid vouchers are accepted globally, from e-commerce stores to physical retailers like Sainsbury’s or Tesco. If they’re Mastercard-branded, they can be used anywhere that accepts Mastercard.
- No personal details needed: If you’re buying a prepaid voucher from a convenience store or vendor, you’re not required to show any ID, keeping the entire transaction private.
- Corporate spending: Businesses can issue prepaid vouchers to their staff to pay for company-related meals and entertainment. This ensures sticking to set budgets.
Where Prepaid Vouchers Are Most Popular
Businesses are quickly becoming aware of the benefits of accepting prepaid vouchers. The anonymity that goes along with them builds consumer confidence that their personal and bank details can’t be shared. Industries and uses include:
- Retail: The largest sector to willingly accept prepaid vouchers is the storefront. These vouchers can be used at department stores, supermarkets, fashion boutiques and electronics retailers.
- iGaming: Online casinos attract customers with their broad range of deposit and withdrawal methods, and prepaid vouchers are a popular option. PaySafe casinos are one example.
- Online shopping: E-commerce stores, from Amazon UK to eBay UK, especially welcome prepaid vouchers, making customers feel confident about shopping in private.
- Streaming services: Mastercard-branded prepaid vouchers can be used to pay for subscriptions with giants like Netflix and Spotify.
- Travel and entertainment: Prepaid vouchers are widely accepted for meals and entertainment purchases when given to company employees.
- Dating sites and apps: Staying anonymous (at first) is uppermost in most people’s minds who use dating apps, so paying by prepaid vouchers keeps within that mindset. Tinder, Bumble and Ashley Madison are all on board.
- Gift vouchers: Prepaid vouchers make for ideal gifts, as unlike store-specific gift cards, they can be used in more ways.
With more businesses seeing the benefits, this figure is expected to rapidly increase in the future.
Prepaid Voucher Limitations
While they fulfil a specific need, prepaid vouchers do have some limitations:
- Retail vendor limits: When purchasing from a retail vendor, you may be restricted to specific voucher amounts and limits. This limitation may prove problematic if you only need to spend more than the highest voucher amount.
- Higher limits require ID: PaySafe, for example, requires you to sign in and create an account if you need a voucher higher than £40. By signing in, you need to provide your name, email and street addresses and your date of birth. This requirement removes the anonymity of the process, which may be an issue for some.
- Non-refundable: Store-bought prepaid vouchers are non-refundable, so if you can’t use them online where you want, you may be stuck with a useless piece of paper.
- Withdrawal limitations: Some online-bought prepaid vouchers can be used to withdraw money to your account, which means providing your bank details after all, defeating the primary purpose.
- Non-replaceable: Just like if you drop a £10 note on the ground and don’t notice, it’s gone forever. The same applies to a shop-bought prepaid voucher. Keep them safe, as they can’t be replaced.
What’s Ahead for Prepaid Vouchers
Prepaid voucher acceptance isn’t showing any signs of slowing down. The anonymity, the convenience and the access for the unbanked population are the primary drivers. In the future, we’re likely to see more partnerships with prepaid vouchers and digital wallets, opening the door for them to be redeemed in even more situations. Businesses and government agencies are expected to use prepaid vouchers more often in the future to keep employee spending fixed. The next step? Blockchain-backed vouchers, designed to make prepaid payments even more secure. The more businesses that get on board, the more robust the industry will remain.