BANGALORE/NEW YORK, June 28 (Reuters) – Prepaid debit cards are expected to be the next big thing in the payment business and almost everyone wants in.

Convenience and secure method of making payments are driving the popularity of such cards, especially among consumers who do not have, or do not regularly use, traditional bank accounts.

The use of prepaid cards is also expected to get a fillip from companies looking to replace paper paychecks with plastic to pay their workers.

Demand for prepaid debit cards is expected to soar, with as much as $118.5 billion to be loaded into the cards in the United States by 2012, up from $8.7 billion in 2008, according to research firm Mercator Advisory Group.

''These cards can be used anywhere just like a debit card and you can reload them, so it's becoming more common, and consumers love the convenience,'' Signal Hill analyst Mayank Tandon said.

Currently, the companies issuing such cards include retailer Wal-Mart Stores Inc., tax preparer H&R Block and payment-transfer companies Western Union and MoneyGram International.

Private companies such as First Data Corp, owned by Kohlberg Kravis Roberts & Co., NetSpend Corp., and GreenDot Corp., which recently filed for a $150 million IPO, are also some of the major players in the industry.

Visa Inc. and MasterCard Inc. process payments from prepaid cards. Although these transactions account only for a small part of their business, MasterCard called prepaid ''a large opportunity'' and ''a high growth area'' during its quarterly earnings call last month.

Visa said in April that prepaid is on its way toward materially contributing to its revenue and may report the business from prepaid transactions separately as it goes into 2011.

In a report last year, the Federal Deposit Insurance Corp. estimated that at least 25.6 percent of US households, accounting for about 60 million Americans, were unbanked or underbanked.
''Prepaid is still a niche product in a developmental phase.

But relative to the growth of other products, it's still something to talk about,'' said John Grund, a partner with payments firm First Annapolis Consulting.

''This is a huge priority for both Visa and MasterCard, as a growing market where there's room to run for both parties.''