A Brief History of Prepaid Cards

Jerome Arthur Uffner graduated from the University of Pittsburgh in 1983 with a degree in economics and political science. Today, he serves as the President of Tern Commerce and was preview CEO of FirstView Financial, a payments company. Jerome Uffner is a recognized speaker at prepaid expos and a pioneer in the prepaid card industry.

Gift cards appeared in the 1970s. However, they didn’t become widely accepted right away. In the 1980s, the American telecom sector developed closed-loop, or single-purpose cards, which are only accepted at certain merchant locations. As time went on, major retailers followed the telcos. The single-purpose cards replaced paper gift certificates.

Open-loop cards, on the other hand, became popular with the federal welfare reform of 1996. The reform mandated the replacement of food stamp coupons with electronic benefits transfer (EBT) cards. This action consequently meant that a variety of businesses had to accept EBT and led to the development of open-loop, or multi-purpose, cards.

Payroll cards grew in popularity in the late 1990s. It was a simple way for companies to pay employees without bank accounts. In 1999, open-loop prepaid gift cards arrived in the United States. All the major card organizations, such as MasterCard and Visa, provide multi-purpose prepaid cards with brand logos that people use to make payments.