🎫 Prepaid and financial inclusion

What “prepaid” covers

Prepaid refers to a payment instrument funded before spending: the holder loads a balance and then spends what was loaded. The issuer advances no money, which sets prepaid apart from both credit and an arranged overdraft. The mechanism is as old as the transit token, which already worked this way, but its legal status has changed. Prepaid gives access to electronic payments without a bank account, and therefore without a branch, without a credit history, and often without proof of address.

Prepaid instruments are classified along two lines. The first separates the closed loop from the open loop. A closed-loop instrument is accepted only by its issuer or within a network the issuer has recruited. An open-loop instrument carries a universally accepted network brand and runs on ordinary card rails. The second line concerns the legal nature of the funds, which may be a bank deposit, electronic money, or simply a commercial claim on a merchant.

The BIN is the first digits of a card number, which identify the issuing institution and the product category it issued. A prepaid BIN, visible in routing tables, determines interchange, authorization rules, and sometimes eligibility for the issuer's rewards program. A merchant that turns away prepaid cards therefore blocks them at the BIN level, not the brand level, which requires a rule configured in its authorization flow. International scheme rules allow this filtering, and sectors exposed to chargeback risk use it heavily, notably car rental, hotels, and subscriptions with a free trial period.

Who is excluded, and from what

Financial exclusion describes adults who hold neither an account at a financial institution nor a mobile money account. It is measured as the complement of the account ownership rate that the World Bank publishes in the Global Findex, based on surveys of tens of thousands of adults. The 2025 edition draws on more than 145,000 people interviewed in 141 economies during 2024. The series provides a comparative baseline across markets, and it does not depend on figures reported by operators.

The gap between the last two figures defines the population every prepaid program targets: adults who own a personal phone but have no account. Account ownership says nothing about account use, since an account can be opened and then never used. India offers the clearest measure of this gap between opening and use, through the Pradhan Mantri Jan Dhan Yojana program, which counts 58.90 crore (589 million) beneficiaries and 41.11 crore RuPay cards issued. Deposits reached ₹310,210.65 crore as of July 29, 2026 (PMJDY, official dashboard), yet the average deposit per account remains below ₹5,300.

The reason adults without an account cite most often is still a lack of money, ahead of distance to a bank branch and the cost of fees. Technology alone cannot remove any of these three barriers: the first is about household income, the second about the branch network, and the third about the price of the service. Prepaid lowers them in part. It removes minimum-balance requirements, moves the point of service to an agent or a store, and shows the cost per transaction rather than as a monthly fee.

Mobile money as a substitute for a bank account

Mobile money is an e-money account identified by a phone number, which a network of agents funds and pays out in cash. It does not depend on an IBAN or, in most markets, on a smartphone. The USSD protocol, available on ordinary mobile networks, opens a session of text menus on a feature phone, and that session is enough to complete a transaction. This technical independence from both bank accounts and smartphones explains mobile money's reach where banking rails were never built, as well as its failures in markets that are already banked.

The report counts 347 live services in 102 countries, 173 of them in sub-Saharan Africa. Concentration there is extreme, with a handful of services holding most accounts and volumes. M-Pesa in Kenya, operated by Safaricom, reports KES 41.68 trillion in transaction value for the fiscal year ended March 31, 2026, or about $322 billion across 46.41 billion transactions. The service claims 40 million monthly active customers and nearly 89% of Kenya's mobile money market. MTN MoMo, operated by MTN Group Fintech, reports 69.5 million active users for fiscal 2025, along with $500.3 billion in value and 1.4 million active agents (MTN Group, annual results published March 16, 2026).

The float (the outstanding funds received from the public in exchange for e-money issued) and its safeguarding at banks are the real focus of supervision. MTN Mobile Money Ghana, for instance, sits in a subsidiary, Mobile Money Limited, which holds an e-money institution license separate from the telecom license. That subsidiary reports GHS 4.1 trillion in transactions against a float of GHS 38.4 billion in 2025. The same structure appears in the Democratic Republic of the Congo, where Vodacash SA holds the M-Pesa license on behalf of Vodacom Congo, as required by the Banque Centrale du Congo. The principle holds everywhere. The entity that holds the public's money is never the telecom operator itself, but a company licensed for that purpose.

Open-loop prepaid cards

An open-loop prepaid card carries an international network brand and runs on ordinary card rails. Producing one splits three roles among separate companies, and the company whose name is on the card is almost never the one that issues it. The issuer holds the license and carries the funds. The program manager designs the product and manages the customer relationship. The processor handles authorizations on the BIN ranges assigned to the issuer. The cardholder sees only the brand on the card, but the protection of the balance depends on the issuer and on the license under which it holds the funds.

Green Dot Corporation is the most complete illustration of this division of roles. It is both a bank holding company, through Green Dot Bank, and a technology platform that rents out its charter to third-party programs such as Apple Cash, Walmart MoneyCard, Uber, and Intuit. Its cards are sold at nearly 100,000 retail locations in the US. Apple Cash depends on it directly: the balance inside iMessage is money issued by Green Dot Bank, not by Apple.

Cash withdrawal is a separate function, handled by ATM networks that are independent of issuers and absent from flow diagrams. Allpoint, operated by NCR Atleos, is the largest surcharge-free ATM network in the US, built on ATMs located in large retail stores. Neobanks and prepaid programs do not operate their own ATM fleets, and their free withdrawal offer depends entirely on an access agreement with a network of this kind. The business models of these programs consistently underestimate this cost line.

Regulatory caps, market by market

The regulatory cap on a prepaid instrument is the maximum amount it can hold or receive, along with the threshold above which the holder must be identified. Its level is a public policy decision, which sets prepaid apart from other payment instruments. The regulator weighs two conflicting goals. A low cap with simplified identification opens access to people without papers or a stable address, whereas a high cap without identification opens a money laundering channel. Markets set different values, and they are not all moving in the same direction.

In the European Union, Article 12 of Directive (EU) 2015/849, as amended by Directive (EU) 2018/843, sets the anonymity threshold. The identification exemption applies only if the instrument is not reloadable, or if it has a monthly limit of €150 and can be used only in the Member State of issue. The maximum amount stored cannot exceed €150. Two exceptions close the loophole. The exemption no longer applies once cash redemption or withdrawal reaches €50, or once a remote payment transaction reaches €50. Crossing either threshold requires identifying the holder.

The European Union recognizes a right to a basic payment account, established by Directive 2014/92/EU, known as the Payment Accounts Directive (PAD), which had to be transposed by September 18, 2016. Few markets outside Europe guarantee anything equivalent. The directive gives every consumer legally resident in the EU the right to open a payment account with basic features in any Member State. The institution approached may refuse only on one of the grounds the directive lists. In countries where this right works in practice, prepaid is no longer the only way into electronic payments, and people use it for convenience.

Meal vouchers, gift vouchers, and closed loops

A meal voucher is a restricted-use payment instrument that an employer gives to employees, usable only within the network of merchants affiliated with its issuer. It forms a payment rail in its own right, with its own acceptance rules, daily caps, list of eligible categories, and affiliation network, yet technical inventories of payment methods almost always leave it out. A restaurant or food merchant that does not get certified for it misses out on a substantial flow of spending in countries where the voucher enjoys favorable tax treatment.

The sector is dominated by two listed groups, Edenred and Pluxee, the latter spun off from Sodexo in February 2024. Their business model rests on three revenue streams: the commission charged to affiliated merchants, the fee paid by corporate clients, and the return on the float, meaning money loaded but not yet spent. Brazil and Latin America weigh heavily in that mix, which explains how sensitive these groups are to local reforms of the vale-refeição, Brazil's meal voucher.

Brazil has legislated on the issue. Lei nº 14.442 of September 2, 2022, requires interoperability between closed and open payment arrangements, effective May 1, 2023. Each issuer must therefore open its acceptance network to competitors' vouchers instead of reserving it for its own. The law also requires portability: the incumbent provider must transfer the balance and future credits, free of charge, to the provider the employee chooses. Both obligations directly target the exclusivity rent on which the market was built.

A gift card is a prepaid instrument bought by one person for the benefit of another, usually closed-loop at a single retailer or group of retailers. Its regulation focuses on validity period and fees rather than on identifying the holder. In the US, the Credit CARD Act of 2009, implemented by Regulation E § 1005.20, prohibits expiration dates earlier than 5 years after issue or the last load. Inactivity fees are allowed only after 12 months without activity, no more than one per month, and only if they were disclosed before purchase. On top of that comes unclaimed property (escheat) law, which varies by state and determines whether an unused balance must be turned over to the state or stays with the merchant.

Social benefits paid by card and wallet

Paying a social benefit electronically assumes the recipient has an account, a condition many recipients do not meet, since these programs specifically target people without one. Governments have therefore built their own prepaid rails. They operate under a constraint the private sector does not face: the payment must reach every eligible person, including those no bank will take on as customers.

In the US, two systems coexist. EBT (Electronic Benefit Transfer), under the QUEST acceptance brand, is operated by the states. The USDA oversees its SNAP component and HHS its TANF component. Food assistance is loaded onto a dedicated debit card with its own routing rules, and eligibility is determined item by item. The merchant's POS system must therefore separate, within a single transaction, the items the benefit covers from those it does not. SNAP served an average of 41.7 million participants a month in fiscal 2024, for $99.8 billion in federal spending, or $187.20 per participant per month (USDA Economic Research Service).

The second system, Direct Express, is a Bureau of the Fiscal Service program whose prepaid debit card serves beneficiaries without a bank account. The federal government pays Social Security retirement benefits, disability benefits, and veterans' benefits onto it. The program has about 3.4 million cardholders (US Treasury, 2025). It is managed by a designated financial agent, a role Comerica Bank held from the start and that Fifth Third Bank is taking over, with cards being reissued in stages starting in 2026.

India took a different route. Rather than issuing a dedicated card, it made the ordinary bank account reachable through a national ID number. The Aadhaar Payment Bridge System, hosted within NACH (India's National Automated Clearing House), routes Direct Benefit Transfers to an Aadhaar number. AePS covers the last mile, allowing cash withdrawals, deposits, and payments by fingerprint at a banking correspondent, with no card or phone. This rail has also been hit by documented fraud, which led the RBI to tighten operator onboarding in 2025.

Closed loops in transit and retail

The world's largest prepaid programs grew out of urban transit, not banking. Fare validation has to complete within a few hundred milliseconds, a constraint that early on required a contactless chip storing the balance on the card itself. Extending these cards to neighborhood retail then took little investment, since an entire population already carried one. Hong Kong, Tokyo, Seoul, Taipei, and Singapore all followed this path.

NETS FlashPay is an example of a ticketing migration that was announced and then abandoned. On January 9, 2024, Singapore's Land Transport Authority (LTA) announced that the card would be phased out of public transit, with a mandatory switch to SimplyGo on June 1. The decision was reversed on January 22 after public protest. Card-based ticketing will continue in parallel, with S$40 million in funding, until at least 2030 (LTA, 2024). The reversal came just 13 days after the announcement.

Japan produced a second family with no European equivalent: retailer prepaid. nanaco, from the Seven & i group, and WAON, from the AEON group, are e-money schemes captive to a retail group yet accepted far beyond its own stores. Rakuten Edy, launched in 2001 as bitWallet, was Japan's first e-money for merchant payments, predating even Suica. These programs make money from customer loyalty and the points awarded to users, not from interchange fees.

India is now trying to combine the two models. The National Common Mobility Card has been backed by NPCI and the Ministry of Housing and Urban Affairs since 2019. This transit card works across urban networks, runs on the RuPay network, and includes an offline purse. The offline purse provides the fast local validation typical of a closed loop, while the RuPay link opens acceptance at any merchant that takes the brand. Several Asian markets are watching the results.

Operating in a prepaid market: what breaks

Accepting these instruments exposes failure modes that do not exist with ordinary cards and that almost never stem from the technology. They follow from three properties of the instrument: the balance is finite, acceptance is conditional, and the issuer is not a bank. The breaking points are listed below in the order they occur.

• Partial authorization. A prepaid cardholder has no overdraft: if the balance is lower than the amount, the authorization fails entirely unless the terminal supports partial approval and collects the remainder with a second payment method. Without that support, the sale is lost at the register.
• Preauthorization. Placing a hold on a finite balance ties up the cardholder's money for days. This is the main reason hotels and car rental companies refuse prepaid BINs, and the refusal applies at the BIN level, not the brand level.
• Refunds. A refund to a closed or expired prepaid card fails, and the funds get stuck in the acceptance chain. The recovery procedure must be written before the channel goes live, not discovered at the first dispute.
• Restricted use. Meal vouchers, EBT/SNAP: the register has to filter by product category and enforce a daily cap. That filter is custom development, with its own certification.
• Cash-out. With mobile money, a merchant can cash out only if the agent has enough cash on hand. Agent float availability is a local operational risk, not a contractual parameter.
• Active account rate. A partner that reports registered accounts rather than 30-day active accounts overstates its network by a factor of nearly four, as the global gap between 2.3 billion and 593 million shows.
• Licensing. An e-money issuing license can be revoked. The regulator's public register is the only reliable source; an issuer's website can stay online after the license is withdrawn.