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Only 1% of consumers buy Visa and MasterCard-branded, open-loop prepaid gift
cards from financial institutions, which may cause some banks to stop selling the cards and focus their attention on other card products, says Tony Hayes, director at Oliver Wyman, the New York-based management consulting firm, and author of the Pulse 2008 Debit Issuer Study.
Sixty-two financial institutions participated in the study, including large banks, community banks and credit unions that collectively issue more than 74 million debit cards or 28% of U.S. debit cards, according to the study released Monday.
Among survey respondents, 61% of financial institutions offer open-loop prepaid gift cards and an additional 16% plan to enter the market, the study says. "While many institutions sell gift cards, only 1% of consumers
purchase prepaid gift cards from financial institutions," the report says.
The Montvale, N.J.-based Network Branded Prepaid Card Association, agrees
financial institutions' branches are not popular for buying open-loop prepaid cards.
"Places like supermarkets, convenience stores, malls and other heavy traffic locations can be better suited as distribution channels," Paul Tomaskofsky, the association's acting executive vice president and chief operating officer, wrote in an e-mail to ATM&Debit News.
"Banks are not the best retailers," Hayes says. "Consumers also see giving gift cards as giving cash, and they don't want to give cash."
To improve sales financial Institutions should promote gift cards on peak gift-giving holidays, such as Father's Day, Tomaskofsky says.
On the other hand, payroll, flexible spending account and health savings account cards have gained traction among large banks, which offer them to corporate customers, the studay says.
