There is a great article on Visa (NYSE: V) and MasterCard (NYSE: MA) over at TheStreet.com. It talks about the incredible growth in prepaid cards. A prepaid card is one which has a certain quantity of stored value on it. Think of it as being similar to a gift card, except that a prepaid card can be used most anywhere. Both Visa and MasterCard want to capture as much market share for prepaid cards as possible because they offer the same revenue model as existing credit cards in terms of processing fees.
The wonderful thing about stored-value cards is that they represent the ultimate desire of the business economy: conversion into a cashless society. Not only does business want this, but so does the government, which will probably increase its use over time in terms of distributing monies such as unemployment benefits and social-security funds to individuals lacking bank accounts.
An important point made in the piece is the fact that prepaid cards will take a long time to reach critical mass and to become economically significant for Visa and MasterCard's bottom lines. This must be kept in mind, yet I have to say that I personally think prepaid cards could become more significant sooner than people think, assuming that the two big guns in this area buckle down and make some smart moves. Let me describe what I mean.
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