Consumers are loading account balances, whether to buy a cup of coffee or to purchase a toll pass. Although a gift card may be the traditional form factor of prepaid products, these stored-value accounts are essentially a gift card purchased for self-use. This concept is revolutionizing the prepaid industry.
As Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, detailed in the 22nd Annual U.S. Closed-Loop Prepaid Card Market Forecast, 2025-2029 report, the trend toward stored-value accounts is not the only factor driving the rapid growth of prepaid products. New segments and use cases are emerging that will drive consumers and businesses to load balances for years to come.
Thriving Amid Uncertainty
One of the chief recent concerns with prepaid, and payments at large, has been that economic conditions could affect consumer spending. However, the prepaid market has continued to thrive amid high inflation and interest rates. This is partly because prepaid products afford a modicum of security in trying times.
“I think where gift cards come in is they give you some certainty,” Hirschfield said. “When you look at incentives—be it consumer incentives, where you’re getting them either for participating in research or as a rebate for buying tires—those incentives come in handy because they are providing you something that these companies know you want and maybe you can add to your budget a little bit.
“It’s the same thing with employer incentives, where if the employer can say, ‘Hey, you did a great job, here’s $25 for coffee,’ that’s a great growth market. To employers, it’s $25 regardless—inflation doesn’t play into the amount they’re going to spend—and it amplifies the spending power for that end user.”
In addition to spending certainty, other economic factors are keeping the prepaid landscape robust. For example, the recent drive for employees to return to work has increased the usage of prepaid products in toll payments.
“People are back in their cars; they are going to the office on a more regular basis,” Hirschfield said. “You’re seeing highway traffic pick up, you’re seeing toll traffic pick up, and tolls have become almost entirely closed-loop. The idea of a tollbooth is essentially nonexistent at this point. It’s all electrically metered—they have the devices in your cars or other options—but that’s creating a significant growth market for the management of those stored-value accounts.”
An Umbrella Product
Prepaid use in toll payments underscores another important trend: self-use. As more merchants and prepaid providers identify this preference, the stored-value trend could significantly affect the retail experience.
“I don’t want to say gift card is a bad term, but we’re expanding the term from gift cards to stored value because you’re seeing a whole lot of self-use,” Hirschfield said. “We’re in holiday season now; it’s all about gifts, and that’s great. But when you get to January, it’s redeeming those gifts. How do you get people to refresh the balance on that gift card or make it change from a gift card to what is now a self-use stored-value account? That’s driving a lot of the growth.”
Another factor driving this trend is the emergence of digital payments, and digital gift cards have similarly surged in popularity. Due to this success, there has been speculation that one of the hallmarks of prepaid, the physical gift card, could be declining.
However, physical cards remain in strong demand, as many givers feel it adds a more personal touch. Additionally, many consumers still need or prefer to pay with a physical card.
What users increasingly desire is flexibility. For example, they may purchase a physical card, but they still want the capability to digitize it or easily reload balances online.
“It’s one umbrella product with multiple form factors,” Hirschfield said. “The stored-value account is the product, and the form factors are a physical card or your wallet on your phone or maybe even on your computer. Those are the areas that are helping to drive a lot of that growth.”
Betting on Prepaid
Within the overall growth trend of the prepaid market, certain closed-loop products are experiencing demonstrable growth. One of the standout segments is digital gaming and gambling, which has experienced double-digit growth in the past few years. However, this surge likely isn’t sustainable.
“It will slow slightly because we’re starting to get to critical mass in terms of legislative approval,” Hirschfield said. “I believe Missouri might be the only new state adding digital gambling this year. That puts us in the 30s, but we’re to a critical mass. In certain states, it’s going to be a tough path to ever get it passed, but the market is growing partly because you just keep getting more legislative freedom to do it.”
Some of the luster around the nascent gambling sector has been tarnished by recent betting scandals across the NBA, MLB, and other professional sports organizations. However, Hirschfield expects any blowback from these scandals to be short-lived unless game manipulation is exposed on a massive scale.
There could be restrictions imposed on the sector, either by lawmakers or sports leagues. While these moves may cap betting amounts or limit certain types of bets, they are unlikely to significantly affect the gaming and gambling market.
“It’s incredibly accessible to the players because it’s on your phone or your computer,” Hirschfield said. “It’s store $25 bucks at a time, and there’s a lot of incentive play as well. You upload $20 and they might give you $20, or if you win your first bet, you might get $100 in play money.
“They understand how you engender loyalty with rewards and with loyalty points to say, ‘Use my platform, not someone else’s.’ It’s a fascinating market. We’ve just started covering it last year, and we’re going to continue to cover more as it matures.”
Taking a Step Back
While some prepaid segments are surging, others are taking a step back. Some of these downtrends, such as in prepaid petroleum or telecom cards, are long-term trends driven by shifting consumer preferences.
Conversely, prepaid transit passes are a strong market now but could be due for a cooldown.
“I think it’s going to shrink overall because the market is moving away from getting your transit pass loaded up with however many rides or dollars,” Hirschfield said. “It’s moving to true tap-to-pay where you tap your debit or credit card and walk in the gate. That’s one where you’re going to continue to see some movement from prepaid to postpaid in the next five years.”
One of the most important segments that could experience turbulence is nutritional assistance. Although programs like SNAP had short-term funding issues during the recent U.S. government shutdown, these programs could face longer-term challenges.
“Recent legislation has started to gut nutritional assistance, so that’s one fairly large load-value area that is definitely going to struggle, and it could end up fully declining,” Hirschfield said. “We haven’t predicted that yet because we need to see over time, but nutritional assistance is the big alert right now.
“If there are electoral changes, you could start to see some of that money getting clawed back, but it’s too soon to tell. It’s going to be an interesting one to watch because it’s critical and it’s got a mature network surrounding it from a closed-loop provider perspective—but it’s dependent on government funding.”
A True Relationship Builder
Despite these areas of concern, the functionality of prepaid payments and their ever-widening scope means the sector will continue its upward trajectory in the next few years. More than ever, an industry that had largely been associated with birthday or holiday gifts has become an all-year product.
Accordingly, retailers and gift card providers should view a gift card purchase as the first step in a long-term customer relationship. As more organizations leverage this model, more use cases and greater utility will emerge.
“I don’t see any stopping growth in all the different form factors of stored value, be it individual consumer purchases—which is in-store and digital gifting—or your consumer and employee incentives,” Hirschfield said. “Those are all on a true continued growth plan because they are so tied in with loyalty and rewards and your phone and all the things that make it a deep and true relationship builder.”
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