Gift cards are more popular than ever, as evidenced by a new study that shows they will account for $130 billion in spending in 2015; a 6% jump over 2014. By 2018, total gift card volume is projected to hit $160 billion.
One of the reasons gift cards are so popular is that issuing banks are offering so many new ones, with plenty of prepaid card options available for folks to choose from, as well as more and more digital options. The authors of the study said that “both retailers and financial institutions have prioritized gift cards as central to their strategies for gaining share of customers’ (increasingly digital) wallets.”
Digital gift cards aren’t really cards at all, but are account numbers that are tied to a digital wallet app or specific retailer app. Recipients of these cards can pay with their smartphones, using the app. Apple Pay and Chase Pay are two of the apps people are using with increasing frequency, powered by Fiserv (PopMoney) and PayPal (Venmo).
Digital gifts, called e-gifts in the study, will account for more than 11% of all gift card spending by 2018. And people are using these gifts, with less than 1% of total spending volume subject to “spillage,” or unused gift card money.
Gift cards and prepaid cards both enjoying growth
Another segment that is growing is general-purpose reloadable gift cards. Although gift cards and prepaid cards are used in similar ways, they are different in a couple of ways. Both are loaded with money at the front end of use, but only prepaid cards can be reloaded. Prepaid cards can also be loaded with direct deposit money, and used to pay bills, making them a viable option for folks who would like to use them instead of a traditional bank account.
Some people prefer to use a prepaid card rather than a bank account in order to avoid bank fees, or because they cannot open a bank account because of immigration status or lack of proper identification. So-called “unbanked” consumers find prepaid accounts very handy for this reason.
More predictions for the coming year
Other projections from the study show that total retail card volume will increase from $41 billion to $43 billion over the next year, while open network branded card volume will rise from $45 billion to $48 billion. Restaurant and miscellaneous categories will see some growth, but will top out at $19 billion for restaurants and $13 billion for miscellaneous.