Nowadays, prepaid subscriptions dominate the modes of business in the service industry. Businesses run on a pay-before-you-use model where subscribers are required to make a deposit in their purchase accounts that allows them to use the service as long as the deposit lasts. Following the trend, a number of companies are offering services as prepaid plans including mobile airtime by telecom operators, utilities like electricity and gas, TV subscriptions as well as gift cards for hotels, restaurants and various kinds of products. Businesses can choose to either sell these plans directly and/or use a network of resellers to distribute them. The market for prepaid based businesses is huge and continues to grow exponentially.
There are a number of channels through which subscribers can recharge their prepaid subscriptions. In developing countries, the existing channel available for recharge to subscribers is primarily scratch cards. Scratch cards are generated, printed and distributed by the service provider to ensure product availability and usage. These can be bought by the subscriber and loaded into their prepaid accounts to avail the service. Although this method of recharge serves the basic purpose, with advancements in technology, it has become highly inefficient and outdated.
Below is a list of issues that come with using scratch cards for prepaid recharging:
- Scratch cards come with high inbuilt costs for the service provider. The entire process of generating vouchers, assigning batches, printing and distributing to resellers results in high fixed costs. Not only this, there is an additional cost of managing inventory of scratch cards.
- Forecasting the total number and denominations of the scratch cards to be supplied proves to be an extremely difficult and a cumbersome process. Erroneous forecasting or some unforeseen circumstances may lead to a shortage of the product in the market. On the other hand, a decrease in the demand for some denomination of scratch cards may result in a downward pressure on its sales.
- The scratch cards have a lead time required for them to become available in the market. Each process in the end-to-end voucher management has a predefined time that it takes and cannot be skipped or hurried through. These strict lead times create a hurdle in responding quickly in order to deal with uncertain and unexpected demand or changes in the customer’s preferences.
- Pre-defined scratch cards don’t leave any room for flexibility for the subscriber. If the available denominations are $1, $5 and $10, the subscriber cannot directly purchase a scratch card for $3, but instead will have to purchase 3 vouchers of $1. Imagine the impracticality of the situation if his desired amount is $3.5. Scratch cards have fixed denominations that restrict subscribers’ choice to purchase according to their needs or purchasing power.
Keeping in view the downsides of using scratch cards, service providers around the globe are now switching to a more efficient means of distributing value. The future of prepaid voucher purchases is non-denominated electronic vouchers, that are generated in real-time. Flexible vouchers, eliminate the effort, costs and risks associated with distribution of value through physical cards. Instead of printing, warehousing, securing and distributing scratch cards, flexible vouchers are generated in real time bearing the denomination of subscriber’s choice.
Unlike the scratch card based method of recharging, flexible vouchers follow a pull based model where vouchers are generated on-demand, making the demand and supply forecasting irrelevant. Distribution is also done electronically and instantly, thereby, completely eliminating those costs heads as well. Additionally, flexible vouchers change the way resellers maintain inventory. There is no need for them to maintain large stocks of vouchers having defined and fixed denominations. This relieves them from the fear of not being able to sell denominations that are not too popular with the subscribers. For subscribers, this means the convenience of buying the exact amount that they want, resulting in increased customer loyalty and leading to a definite increase in revenue that was previously being lost due to fixed denominations.
As more of these benefits of using flexible and electronic vouchers in place of physical scratch cards become evident and are realized by the service providers and their subscribers, it is expected that the developing markets will see a shift in trend in the coming years. Flexible vouchers are a promising product of the future and aim to optimize the previously inefficient distribution process.