Twenty Years of Payments: Where We’ve Been and Where We’re Going

Prepaid cards can trace their roots back to the 1970s with the creation of basic gift cards. The prepaid sector experienced a significant milestone in the 1980s with the development of single-purpose, closed-loop cards, and then again in 1999 when open-loop (Visa/MasterCard) prepaid gift cards first made their appearance in the United States. That was the year of Netspend’s founding (1999) and the majority of the world still relied on traditional methods of payment such as cash and checks. When it came to technology, people were skeptical at best and intimidated at worst. Talks of the impending doom of Y2K were starting to percolate, and the idea of people trusting computers with their accounts, cards and money was unlikely.

Today – particularly for younger generations and those in higher income brackets – the idea of writing or physically depositing a check, or entering a brick-and-mortar bank location, is an age-old concept. Technological advancements and shifting customer behaviors have kept the payments industry in a constant state of change, giving the economy some of the most transformative moments in the past two decades.

Revolutionizing Peer-to-Peer Payments

While internet adoption was extremely low in 1999, and the majority of U.S. households didn’t have a broadband connection, the launch of PayPal was still considered revolutionary. Initially, most of its adopters were eBay sellers and buyers, which led to eBay eventually acquiring PayPal in 2002. Prior to this, people had to settle payments via checks or money orders. PayPal let them virtually exchange funds, which established the foundation for peer-to-peer (P2P) payments.

Nearly a decade after the birth of PayPal, the popular P2P payment app Venmo entered the market allowing users to send money to each other through their mobile devices. Venmo, and similar apps like Cash App, have made paying someone back for a coffee as easy as it always was with cash. The rise of P2P and prepaid cards coincide, as both offer security, help with budgeting and don’t require a traditional bank account. While P2P payment apps are still in their infancy, they will continue to move consumers further away from cash and increase the use of ever-evolving prepaid options and partnerships.   

Mobilizing Payment Processing

In 2009, Square launched an integrated payments system and with a single piece of hardware compatible with smart devices effectively disrupted the payments industry and made card processing more widely accessible. Before Square, the costs and complexity of card processing systems made it impractical for many merchants to accept anything other than cash.

Payment processing providers like Square and Stripe make it easier to secure customer loyalty by providing the kind of experience customers now demand. Mobile payment processing solutions make it easier to track customer behavior, as well as implement incentives and rewards programs. Advancements in both payment processing and prepaid have dramatically streamlined financial management for business owners. Prepaid solutions are not only compatible with most mobile processing systems, but they also simplify employee expenses, payroll and even distribution of cashless tips. As more businesses begin adopting mobile payment processing and prepaid solutions, the reality of becoming a successful small business owner becomes tangible for more people.

The New Face of Banking

The way people interact with banks looks entirely different today than 20 years ago with more choices, pricing options and value propositions than ever before. Prior to the rise of digital banking, institutions tended to focus more on cost savings than the end-to-end customer experience. Now, with the acceleration of financial technology and people exploring non-traditional banking options like prepaid cards, banks have had to reconsider their target customers and level of convenience they offered in both physical and digital channels.

Shifts in technology and customer preferences have spurred the demand for convenient, secure and seamless digital banking. Ecommerce, travel and hospitality companies, and social media, continue to set the bar high for customer experience. This has dramatically changed how financial institutions approach servicing and communicating with their customers. While digital adoption among banks has been slower than in other sectors, the digital products and services banks now offer mark a notable departure from how they operated before the new millennium with increased focus on ease of use, logical flows and meaningful messages and propositions.

The Evolving Role of Payments

The integral role the payments industry plays in the global economy, and society as a whole, requires it to continue evolving to support the demands of accelerating innovation, new technology and ever-rising customer expectations. It’s hard to believe that Apple introduced the iPhone only ten years ago and how it, along with other smart devices, has evolved into a primary instrument for financial access, usage and planning for wide ranges of customer segments.

Digitization and the widespread availability of prepaid and other non-traditional banking options have defined industry trends. From apps to reloadable cards and mobile wallets, the team at Netspend has anticipated, witnessed and participated in some of the most transformative moments in the payments industry. If the last 20 years are any indication, the kind of progress we can expect by the time 2039 rolls around is virtually limitless. Netspend is excited to continue to be at the heart of payments for many consumers.


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