ATMIA's Debit Council has today released the industry's first set of international best practices for Stored Value or pre-paid debit cards.

Some industry experts believe that Stored Value represents the next killer application for the card industry.  

ATMIA DC best practices manual like this can help the industry become more efficient and more secure in delivering stored value products to millions of pre-paid cardholders, commented Lana Harmelink, ATMIA's International Director of Operations. It is aimed at issuers, processors, networks and managers and marketers of stored value card programs in whichever country they may be based.

The stored value card market is still in its early days. Consequently, in addition to exciting growth possibilities, there are some unresolved industry issues and uncertainties associated with these new products which can be clarified through industry-wide consultation and dialogue. 

The best practices cover a market overview and brief history, definitions and categorization of Stored Value products, business, cost and profit drivers, useful websites for this dynamic new sector, best practice recommendations for consumer protection and education, and for product distribution and fraud prevention. ATMIA's Stored Value Products manual also outlines the current regulatory challenges for the US stored value card market.

Broadly, two key elements separate stored value cards from other forms of electronic payment:

• Stored value cards are prepaid, that is, the value loaded onto the card is paid for or deposited at the time the cardholder takes possession of the card, before the cardholder uses the card for payment of goods and services.
• Stored value cards are not normally linked to traditional bank accounts.

Stored value cards were first introduced in the early 1990s, starting as closed-loop products for limited purposes in limited locations's providing functionality similar to store gift certificates or vouchers in an electronic form. After a few years, in order to increase transactions for these types of cards, and to introduce interchange fees, the card associations allowed closed-loop cards to run over their rails.  These new types of private label cards also made it easier for merchants to accept the cards because they used the same rails as their credit cards. After that, multi-purpose, or open-loop SVCs, followed, which could be redeemed and used in multiple locations. Dozens of types of SVC are now available, and market growth is escalating. Recently, financial service providers began focusing their attention on how SVCs can help the unbanked and underbanked markets.

One of the key markets for the expanding SVC sector is the unbanked population. It is estimated that there are two billion unbanked people worldwide. The unbanked population is made up of people who do not have a traditional checking or savings account. This population is made up largely of the poor, credit challenged, and young, as well as those individuals who do not desire to have bank accounts for reasons such as privacy. Using the term cash based instead of unbanked, underbanked, or credit challenged, further extends this market to include teenagers and students. SVCs offer these groups access to many important features of traditional bank accounts, such as the ability to store funds and pay bills, without having to meet credit requirements or provide unwanted personal information.