The U.S. prepaid gift card market has reached a point where consumers have become comfortable giving merchant’s proprietary cards as gifts and even reloading them for long-term use, new survey findings suggest.
The survey data are part of First Data Corp.’s annual consumer behavior report regarding gift card use. The Atlanta-based card processor, which generates revenue from merchant gift card programs, surveyed 2,768 consumers online in September for its research.
Consumers reloaded their closed-loop card accounts more last year, and rewards were a major factor in their decisions to do so, the survey data suggest. Some 25% of respondents cited rewards as the primary reason they reloaded their card accounts, up from 15% who did in 2009, when 3,849 consumers responded to First Data’s survey.
If a merchant ties a reward mechanism to its gift card, it could lock in repetitive behavior and make its stores the primary places cardholders buy food, gas and get lunch, Michael Hursta, vice president and category manager for First Data’s closed-loop prepaid solutions division, tells PaymentsSource.
Rewards do not necessarily need to be financial incentives, he adds.
Consumers who register their cards with select merchants could be made privy to information such as upcoming deals and company news, Hursta says. “It’s the idea of creating a bit of exclusivity with consumers,” he adds.
Consumers also are reloading close-looped cards as a matter of convenience, the survey data suggest.
Some 18% of respondents believe reloading and then using a closed-loop card account is better than using cash, down from 20% who said so in 2009. Some 8% would rather use the card in place of a credit or debit card, down from 19%.
First Data suggests merchants emphasize the convenience of using and reloading their gift cards. “The more merchants promote the existence of a gift card program, the more consumers will remember they have one,” Hursta says.
Consumers continue to purchase closed-looped cards primarily as gifts for special occasions such as birthdays and the holiday season, the survey data show. Some 65% of respondents purchased a card for a birthday in 2010, up from 60% who did the previous year. Consumers purchasing cards as Christmas gifts remained at 50% over the two-year period.
Consumers are receiving more closed-loop cards as gifts compared with network-branded cards, according to the survey. Some 72% of respondents received a closed-loop card in 2010, up from 61% who did the previous year. Recipients were given open-loop cards 28% of the time in 2010, down from 39%. Merchant cards usually are free, whereas open-loop cards supported by such brands as Visa Inc. or MasterCard Worldwide tend to come with fees.
Consumers are not giving and receiving electronic prepaid gift cards on a large scale yet, but the practice has become more widespread since September, Hursta believes. Only 12% of consumers last year purchased an e-card, while 14% of respondents received one. First Data did not have comparison data from 2009.
Some 48% of respondents indicated they are interested in receiving an e-card. For those who were not interested, 70% preferred the actual card while 28% cited online-security concerns.
Social-networking sites will help spur e-cards, Hursta says. First Data has several merchants using a Facebook e-gift application on their “like” pages (
“If that’s where people are spending their time in a virtual sense, then it’s a perfect environment to insert gifting and prepaid because you have all this information-sharing happening between people,” he says.
