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N.S. Vageesh

The market for prepaid cards is expected to be around $400 million in 2005.

Chennai , June 20

PREPAID cards - the electronic equivalent of traveller's cheques - for overseas travel are getting more popular. Companies, especially those belonging to the software sector, are buying them in significant numbers for the overseas travel of their executives.

Mr Mohnish Kumar, Managing Director, Centrum Direct, a moneychanger that issues a prepaid card (co-branded with Citibank) denominated in dollars, said: "We sold about $12 million worth of prepaid cards in calendar 2004 and expect to do about $40 million this year."

The market for prepaid cards is expected to be around $400 million in 2005. UTI Bank, ICICI Bank, HDFC Bank, and Citibank are the other players in this market.

Prepaid cards are beginning to replace traveller's cheques in a big way. But Mr Kumar said, "Prepaid cards will certainly eat into the traveller's cheques market. But we do advise overseas travellers to prudently carry a small amount in cheques, just in case something malfunctions in the card."

How much does a prepaid card cost? "It is not expensive. There is a $4 charge for activation of the card and $2 charge for every load/ reload."

The biggest advantage of having a prepaid dollar card is that it can be used at all Visa ATMs and swiped for purchases at point of sale terminals. And there is no need to shop for forex rates.

Mr Ajay Jalan, Director (Finance), i2 Technologies, said: "We save a considerable amount in terms of forex premium that one suffers every time one uses a rupee denominated credit card for purchases abroad."

Visa takes around 3-4 per cent as service charges and then the exchange rate used to be 3-4 per cent higher than the RBI benchmark rate. "So, in total, it costs 6-8 per cent higher in rupee credit card than the dollar card. But if it is a dollar card, all this money is saved."

He added: "The savings that we have gained by using this card are considerable. On our annual purchase of forex of about Rs 70 crore, we may have saved to the tune of Rs 3-4 crore."

What about drawbacks? "It is not possible to use the card for online purchases. For travellers in the US, this may be a requirement," said Mr N. Lakshminarayan, Senior Manager (Finance), Aztec Software.

Mr Jalan added, "I think the issuers need to introduce a card denominated in euro and pound too. Right now, they have only a dollar card."

Prepaid cards are beginning to penetrate the non-metros too. Mr Kumar said: "We found that there is a high amount of sale even in smaller towns such as Surat and Ahmedabad. When we looked at it closely, we found that there were a significant number of people among the labour class going abroad."

"And many of them are not very comfortable dealing with foreign banks/exchange houses due to poor literacy. When they take a prepaid card, they just need to go to the ATM which treats them equally and without disrespect. All they need to remember is their four-digit pin number."

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