Data: Reinventing the gift card

Consumers today are more likely to own a prepaid card than conduct online bank bill payments, according to the Federal Reserve Bank of Boston. However, the prepaid ownership trend is negative while the rate of online bill payment is relatively flat. Similarly, ownership levels of credit cards and debit cards have also remained flat over the last three years of the Fed’s consumer survey. The 2017 survey was conducted among 3,099 adults over the age of 18 years of which 895 consumers also participated in the 2015 and 2016 surveys.

A common use of prepaid cards is to help a person with managing money, unlike credit cards which allow a person to revolve a balance. However, in the Fed’s research it noted that credit card owners have become more debt conscious recently, as 45 percent of credit card users paid their balance in full in 2017 versus only 41 percent in 2015.

The popularity of digital prepaid gift cards has recently received a major boost among consumers, according to First Data’s Prepaid Consumer Insights Study. The research, which is based on a survey of 2,000 consumers, also found that the per capita purchases of gift cards, both digital and physical, has also grown in the last year. While physical prepaid gift cards have continued a multi-year growth trend, until recently, the purchase of digital ones had been stuck at a rate of four per person annually.

One potential contributing factor behind the growth in digital gift cards is that major physical card competitors have recently been very aggressive in the digital world.

Last year, Blackhawk Network acquired digital prepaid card player CashStar Inc. for $175 million to boost its digital gifting business. Also last year, First Data and Fleetcor attempted a joint venture to drive digital gift card growth, but terminated the arrangement, citing regulatory concerns. This follows First Data's 2014 acquisition of Gyft, a digital gift card provider.

When it comes to buying prepaid gift cards, over nine in ten consumers reported that they had made a purchase, according to a Blackhawk Network study conducted in March 2018 among 3,030 adults. While purchases of gift cards for someone else was very high, as could be expected, the amount of consumers stating that they had purchased one or more for themselves was an impressive 69 percent.

The survey also found that while 74 percent of gift card buyers have made a purchase from a third party such as a grocery store or gift card mall, almost half (49 percent) prefer to buy the gift card directly from the retailer or brand where the card can be used.