Rise of the Stored Value Card Industry

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Author: John Campbell

Article source: http://cashbuzzdapp.com/. Used with author's permission.

Since their emergence as the newest product of the financial industry in the early '90s, stored value cards (SVCs) have become the fastest growing financial product on the market.

The first SVCs were introduced by select retailers that issued them as gift cards; essentially electronic gift certificates. With a gift card, the only cost to consumers is the exact dollar value of the funds they place on each card. These first SVCs were known as "closed loop" cards, which could only be used to make purchases from the retailer that issued the card. For example, a Sears gift card can only be used at any Sears store worldwide.

Other closed loop cards include SVCs that can only be used to purchase specific goods or services, such as gas cards or medical insurance cards, or cards that can only be used at one specific place of business such as a mall or small business.

The popularity of closed loop SVCs led to the development of "open loop" cards that are functionally similar to debit or credit cards. Often sporting the Visa, MasterCard or Discover logos, open loop SVCs can be used to make any purchase from any retailer that accepts credit cards. Their more flexible spending allowances have led to open loop SVCs becoming the leading SVC in use today.

As an estimated $38-$45 billion industry in 2003, the SVC industry is projected to account for $72 billion in transactions for 2006 alone. There are an estimated 2,000 SVC programs in existence today with 20 million potential users.

The SVC industry is expected to continue its explosive growth well into the future.