Are you in?

Subscribe and receive the latest updates on the future of payment.


Virtual Gift Cards are an Opportunity for Merchants to capitalize a Huge Potential

By Susanne Steidl

Mobile technology is changing the way people use gift cards – and creating new opportunities for merchants

Every busy shopper knows the benefits of the gift card: it’s an effortless way to wish someone a happy Christmas or thank them for a job well done. It allows the recipient to buy what he or she truly wants, and it’s as easy to use as cash.

Perhaps that’s why 2015 gift card sales in the U.S. reach $130 billion, a 6% increase on the year before. But this is just the beginning, as gift card sales are predicted to reach $160 billion by 2018. E-gifting had the largest increase, rising to 26% in 2015, representing $7.1 billion in volume. This increase is also expected to support the overall payment industry growth.

Long-term prospects for e-gifting remain promising as more payment services become mainstream and plastic cards make the switch to digital, according to CEB Tower Group, a research firm. CEB notes that many consumers spend more than the value of the gift card, resulting in more sales for retailers. And for eight years straight, gift cards have been the most-asked-for gift item, the National Retail Federation found.

There has been a fundamental shift in the way people use gift cards

Needless to say, the gift card market is significant. But even as these cards are enjoying broader appeal than ever before, consumer attitudes towards gift cards are changing.

Consumer`s confidence and trust in mobile retail and payment apps is growing – at least where gift cards are concerned. This is good news for merchants for several reasons.

For one, virtual gift cards cost less than plastic ones. They can be used flexibly and are trackable, which provides merchants with a wealth of valuable data. For another, consumers that store and redeem gift cards on a mobile device are likely to be more comfortable making other kinds of mobile payments in the future.

Merchants are meeting new consumer demands

Merchants that want to capitalize on the enormous potential in the gift card market would be smart to start selling their gift cards online. It’s a relatively easy way to keep up with changing consumer demands. Supporting e-gift cards and making sure that both virtual and physical cards are compatible with popular gift card storage apps are important next steps.

In doing so, merchants are meeting new consumer demands, but they also stand to gain from reinforced brand messaging, increased foot traffic in stores, and higher sales. These are just some of the proven benefits that gift cards deliver.

Rewards and incentives drive gift card purchases

Another area where merchants can benefit from gift card users is with rewards and incentives. According to a survey, respondents, on average purchased two gift cards in the past twelve months because loyalty or rewards points were offered. Furthermore, a third of respondents ended up making a purchase at a particular store because an incentive was offered, even when they were not planning to do so. And 40 percent spent more than originally planned because an incentive was offered.

By linking up rewards and incentive programs with gift cards – for example, by offering customers a discount on their purchases when they also buy a gift card – merchants can turn one-time shoppers into repeat customers and bigger spenders. Rewards and incentives could also convince customers to to up their gift cards after use.

Reloadable gift cards are a big opportunity

The function reloading is a big opportunity. After all, customers who do so usually end up making additional purchases. Most respondents have never reloaded a gift card, but that could quickly change, given consumers’ rapid adoption of other features and functions in the gift card market.

As the way people buy, manage, and use gift cards changes, merchants must keep up with these new trends and technologies. They stand to make big gains, if they do so.

Leave a comment.


We getting nice information through this blog. It’s Greate and Very Helpful. Thanks again and keep up the great work!

S. K.Flag

Good article. As the senior business analyst for gift card development at Macy's/Bloomies, I agree with the amazing opportunities related to gift card purchases (for both the consumer and merchant) but digging a little deeper (which you addressed in one of your answers) resides with the mobile reward card/loyalty programs. Macy's is rolling out Star Rewards in the fall. This loyalty program partners with our customers' mobile wallet and is folded into the checkout experience. This reduces several pain points (the scene at the register where a customer is frantically looking for that physical reward card/eliminate the dreaded scenario where you get home and while admiring your purchases, you come across that Macy's physical reward card is still in your wallet/purse). Over the next year or two, I expect most big box retail companies to offer something similar (or expand if doing this already).

Martin RödénFlag

Thanks Susanne, the mobile generation (i.e all) is always looking for bargains and the use of gift cards as mobile rewards and payments is a great opportunity. Well written!

Kylie DottsFlag

I like how you said that customers who use reloadable cards will often end up making additional purposes. In all honesty, this is really the beauty of the gift card, especially when you can use discount through cash for gift cards. When people feel like it isn't their money that's being spent they're more likely to use more of it because the responsibility isn't there. Hence the benefit of using gift cards to boost business.

Dennis MarrowFlag

What are the trends in gift cards since January 2016?

Susanne SteidlDennis MarrowFlag

Dear Dennis Marrow,

Thank you for your question! In our article we anticipated trends for virtual gift cards that reach far into the future and that are only now on their way to become state-of-the-art applications. But to name a current trend which is more and more becoming a standard is connecting virtual gift cards, loyalty and reward programs with your mobile wallet: Consumers will have the option to store, manage and make payments with gift and loyalty cards using their mobile wallet, and retailers have the resources needed to make improved digital connections with shoppers. We will certainly blog about some more developments in that sector, so stay tuned.

If you would like to give us feedback, propose a collaboration, or become an author on our blog, please feel free to connect with us.