Prepaid Mobile Is Industry's Fastest-Growing Sector

Eighteen million mobile phone subscribers in the US are on prepaid plans, and by 2007 the Yankee Group predicts this user base to grow almost 70 per cent to 24.8 million subscribers. Prepaid is a USD 10 billion a year market in the US, and with Yankee reporting prepaid wireless penetration to lag that of Europe (63 per cent) and Asia (45 per cent), new products and services are being brought to market. Just over 60 per cent of US consumers own a cell phone, according to CTIA figures, and with that other 40 per cent not yet wireless, retailers and service providers are using prepaid as a tool to lure new subscribers.

7-Eleven launched a range of own-branded prepaid phones in April 2004, while Wal-Mart and other major US retailers are rumored to be considering their own products. Many already offer scratch cards or electronic POS activation (POSA) services on behalf of US wireless carriers, so the provision of prepaid phones is the next logical step. Retailers can use existing POS systems to offer prepaid products and services by way of technology that retrofits to terminals. If ATMs, kiosks and web browsers are linked to this system at store level, consumers can make unattended purchases of prepaid products and services.

Delivering POSA services via a card terminal or networked solution eliminates inventory such as scratch cards, which are at risk of theft from shoplifters or from dishonest store employees. Prepaid products are a top-five profit generator at convenience, grocery, drug and liquor stores, or any retailer with high foot traffic, and processing is now being bundled with credit and debit card processing. Compared to other card transactions, prepaid generates higher commission for independent sales organizations and merchant level salespeople, and this fact has resulted in substantial interest from the industry sector.