Prepaid 101: The Connective Tissue of Modern Money Movement

When Canadians tap a card for coffee, receive wages instantly, or move money through a digital banking app, they may not realize prepaid technology is often working behind the scenes.

For years, prepaid was commonly associated with gift cards or single-use products. That view no longer reflects the market. Today, prepaid is a core part of Canada’s payments infrastructure, supporting everything from digital banking and government disbursements to gig worker payouts and embedded finance experiences. That shift is already visible in consumer behavior. New CPPO research found that 47% of Canadians use online or challenger banks, while 41% now maintain relationships with both traditional and digital providers.

In many ways, prepaid has become the connective tissue of modern money movement. It helps funds move quickly, securely and in a controlled way across a growing range of use cases. As Canada prepares for major changes in payments and financial services, including the Real-Time Rail, open banking and more automated commerce experiences, prepaid is positioned to play an even bigger role in how money moves.

Prepaid combines flexibility, control and trust

At its simplest, prepaid allows users to load funds and spend them using existing payment rails without relying on a traditional bank account in the same way as a standard chequing product. That structure makes prepaid useful for a wide range of people and programs. It can offer a safer alternative to cash because, if a card is lost or stolen, funds can often be recovered. It also gives users more control by letting them load and spend a set amount. 

There are two main prepaid models. Open-loop prepaid products are tied to payment networks like Visa or Mastercard and can be used anywhere those networks are accepted. Closed-loop prepaid products are more limited and can only be used with specific retailers or merchants. Open-loop prepaid has become especially important because it combines flexibility with trust. These products have broad acceptance, can be single-load or reloadable, and operate within regulatory frameworks that include know your customer requirements, anti-money laundering obligations and consumer protections.

That combination of flexibility and familiarity has helped fuel significant growth. Canada’s prepaid market is valued at roughly CA$14 billion annually and is projected to reach CA$17 billion by 2028. There are now more than 67 million open-loop prepaid accounts in Canada, with that figure expected to climb to 88 million. In 2024, 27% of consumers opened a new prepaid account, compared with 21% for debit and 14% for credit cards. Satisfaction is also high, with reloadable prepaid products reaching 96%.

Security and control are part of that appeal. Sixty percent of consumers worry about using credit cards online, while 30% prefer prepaid for online purchases because spending limits reduce risk.

Prepaid has become a practical platform for fintech innovation

That is one reason prepaid has become such an attractive platform for fintechs. For financial innovators, prepaid offers an accessible infrastructure layer for launching programs, embedding finance into customer journeys and creating modern payment experiences without taking on all the complexity associated with traditional banking rails.

Across Canada, that model is already visible. KOHO has built reloadable prepaid accounts around features like spending insights, instant pay and credit-building tools. Mydoh, backed by RBC, uses a prepaid youth card and app to help families manage allowances and teach money habits. EQ Bank pairs prepaid-powered spending capabilities with savings and budgeting tools. Wealthsimple, Brim and other innovators in the CPPO membership also reflect how prepaid supports more flexible financial services.

Prepaid expands access and lowers costs

Just as important, prepaid expands access. Traditional banking products can come with minimum balance requirements, monthly fees and barriers like credit checks that exclude many people. That matters for newcomers with limited credit history, gig workers with uneven income, youth entering the financial system and rural or Indigenous communities where access to bank branches may be limited.

It also matters for affordability. A prepaid transaction costs about 30 cents, compared with roughly $15 to $25 for issuing and processing a cheque. That difference becomes hard to ignore when the CRA is still holding $1.7 billion in uncashed cheques across 10.2 million items. Prepaid presents a more efficient alternative. It is also more user-friendly: 70% of underbanked or unbanked Canadians say they are frustrated by receiving paper cheques.

Government programs already show prepaid at work

This is why government disbursements have emerged as such an important prepaid use case. Prepaid can offer broad access, faster delivery of funds, lower administrative costs and stronger controls. That modernization case is also reflected in public sentiment. Nearly seven in ten Canadians say governments should stop mailing cheques and modernize payment and disbursement methods.

• In Canada, RBC Right Pay has been replacing paper cheques in the public sector since 2015.

• The Canadian Red Cross has used prepaid cards to distribute disaster relief funds quickly while restricting use to essentials such as groceries and transit.

• During the pandemic, KOHO and We Financial helped distribute CERB benefits, including to Canadians without bank accounts. 

• We Financial, through Peoples Trust, has also supported disbursements tied to income assistance, treaty annuity payments, CRA benefits and Jordan’s Principle and Inuit Child First funding.

Prepaid is well-positioned for Canada’s next phase of payments

Looking ahead, prepaid’s importance is only to grow. Canada is entering a new phase of payments modernization, and prepaid sits close to the center of three major shifts: Real-Time Rail, open banking and AI-driven commerce. Its instant-load capabilities align with real-time payments. Its flexibility makes it a useful endpoint in multi-banking relationships. Its programmable features and controlled-spend settings also make it well suited for embedded and automated payment experiences.

Canadians have already embraced digital-first tools and more flexible ways to manage money. Many of those experiences already rely on prepaid infrastructure, whether consumers realize it or not. That is why prepaid should no longer be viewed as a niche product category. It is a practical, proven infrastructure layer that helps connect people, businesses and governments to modern financial services.

The CPPO exists to support that responsible growth. As the only association dedicated to Canada’s $14 billion prepaid payments industry, CPPO brings together networks, regulated banks and financial institutions, fintechs, program managers, challenger banks, service providers and entrepreneurs.