Prepaid refers to services paid for in advance. Some examples include gift cards, preloaded credit cards, tolls, and cell phone usage credit, among other items.
Prepaid phone cards began in the late 1970's in Italy. The purpose was to provide convenient phone calling for travelers and to combat payphone vandalism1. It wasn't until 1992 that the debit phone card began in the US.
Prepaid services and goods are sometimes targeted to marginal customers by retailers. Prepaid options can have substantial cost reductions over postpaid counterparts because they allow customers to monitor and budget usage in advance.
Recent statistics (OECD Communications Outlook 2005) indicate that 40 % of the total mobile phone market in the OECD region consists of prepaid accounts. In some countries, such as Italy, Spain or Mexico, market share of prepaid can be as high as 90 %. In other countries, such as Finland or South Korea, the figure drops to about 2 %.
It seems that after serving well to the mobile phone market on countries like Brazil, Russia, India and China the prepaid card business model is opening the doors to other services.
The first nonphone-card prepaid programs were launched in the mid-1990s by national retailers such as Blockbuster Video and Kmart2. And now with services such as Flexgo (Microsoft), Wi-fi Internet (Velox), Brazilian AICE fixed phone (Anatel) gives their users the opportunity to access a lot of communications services that even in the 21st Century would last another century to be in the hands of low income population if not for those innovative business models.
Another service thought to follow prepaid model is the Ampla one, deliverer of energy services in 66 cities of Rio de Janeiro, who intends to launch this year the prepaid light account. Through a 0800 telephone number, the user goes to determine how much he wants to pay of energy by month. And, by his mobile phone, the user will be advised when his credits would be depleting.
[1] In fact there was a shortage of coins in Italy at the time and payphone theft was common. Cards were introduced with a magnetic strip on the back for use in special phones to combat the coin shortage.
[2] Tom Locke, “Billions in Gift Cards: First Data Plans to Add Loyalty Feature in ’05,” Denver Business Journal, December 10, 2004 print edition.
Sunday, July 02, 2006
