The emergence of several new prepaid debit card programs and growing national distribution of major prepaid card brands is helping to generate marketplace interest in buying and selling prepaid card portfolios.
For the first time this year, prepaid debit cards will register on the card portfolio sales radar as several prepaid card portfolios change hands in what has been a small and cloistered market, consultancy R.K. Hammer predicts.
Some six prepaid card portfolios will change hands this year, amounting to about $2 billion in assets, Robert Hammer, chairman and CEO of the Thousand Oaks, Calif.-based firm, said in a Feb. 13 press release.
And though prepaid cards are part of an industry niche whose owners are primarily private investors, "there is a growing buzz about buyers interested in these portfolios," Hammer tells PaymentsSource.
Unlike credit card portfolios valued based on their total assets, prepaid card portfolios are valued based on their total number of accounts and fee structures, Hammer says.
"The prepaid card industry is mostly privately held and difficult to value and track, but it is growing up to the point that people are beginning to talk about buying and selling specific programs," he says, declining to name any specific deals.
Though unlikely to grow to the size of multibillion-dollar credit card portfolios, prepaid card portfolios may command "significant" premiums when they change hands, Hammer says.
The improving economy and record-low credit card charge-off rates also are creating ripe conditions this year for more credit card portfolio sales than last year, according to Hammer.
Prime bankcard portfolio sales, along with those of subprime and private-label credit cards, will see "a large jump" in 2012 compared with previous years, if present market conditions persist, he forecasts.
Based on recent deals and discussions with industry players, Hammer predicts some 32 prime bankcard portfolios will change hands this year, amounting to about $37 billion in assets altogether (
That figure would mark a significant increase in portfolio sales compared with 2011, but it includes one very large, $30 billion credit card portfolio sale that will close this year. Minus the outsize portfolio-sale, new card-portfolio sales this year will reach between $5 billion and $7 billion.
Specifically, Hammer expects about six subprime credit card issuers to sell their portfolios this year, and about six private-label issuers will also find buyers for their portfolios, representing a total of about $4 billion in assets.
"Prices for various deals will of course vary significantly," Hammer says.
Factors driving the increased sales pace include improvements in issuers' capital, lower default rates and lower loss provisions, he says.
Recent new marketing programs for all types of card portfolios are also heightening interest among buyers, he says.
Combined with rising deal prices, these factors "all point to a more active market for card deals in 2012," Hammer says.
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